UC-NRLF 


MUNICIPAL   OWNERSHIP 


HD 


(  With  a  Special  Survey  of 

MUNICIPAL  GAS  PLANTS 

IN  AMERICA  AND  EUROPE 


COMPRISING    A    VIEW    OF    THE    GENERAL    PRINCIPLES    OF    PUBLIC   OWNERSHIP;     ITS 
RELATION    TO   THE    PUBLIC  WELFARE;    WITH    A    SPECIA      STUDY   OF   GAS   WORKS 
IN    AMERICAN    AKD    EUROPEAN    CITIES    UNDER   BOTH    PUBLIC    AND    PRIVATE 
OWNERSHIP;    A    COMPARISON    OF    EFFICIENCY,    COil    S,     AND    RATES    OF 
CHARGE;    AND  THE  INFLUENCE   OF   PUBLIC  OWJ  SRSH1P   ON   GEN- 
ERAL    PROSPERITY,     GOOD     GOVERNMENT,     AN  »     DEMOCRACY. 


By 
ALBERT  M.  TODD 

President  Public  Ownership  League  of  America;  Fonr  r  Member  of  Congress; 

President    A     M.    Todd   Company;    Member   Am  -rican   Academy   of 

Politico'  and  Social  Science,  American  Asso    Uion  for  the 

Advancement   of    Science,    National    J.  .nicipal 

Lf^'ue,     Society    of    Chemical 

dustry,   Etc. 


Public    Ownership    League    of    America 

CHICAGO,  ILLINOIS 
1918 


GIFT   OF 


MUNICIPAL  OWNERSHIP 

With  a  Special  Survey  of 

MUNICIPAL  GAS  PLANTS 

IN  AMERICA  AND  EUROPE 


COMPRISING    A    VIEW    OF    THE    GENERAL    PRINCIPLES    OF   PUBLIC   OWNERSHIP;     ITS 
RELATION    TO   THE    PUBLIC   WELFARE;    WITH    A    SPECIAL    STUDY   OF    GAS   WORKS 
IN    AMERICAN    AND    EUROPEAN    CITIES    UNDER    BOTH    PUBLIC    AND    PRIVATE 
OWNERSHIP;    A    COMPARISON    OF    EFFICIENCY,    COSTS,     AND    RATES    OF 
CHARGE;    AND  THE   INFLUENCE   OF   PUBLIC  OWNERSHIP   ON   GEN- 
ERAL    PROSPERITY,     GOOD     GOVERNMENT,     AND     DEMOCRACY. 


By 


ALBERT  M.  TODD 

President  Public  Ownership  League  of  America;  Former  Member  of  Congress; 
President    A.    M.    Todd    Company;    Member    American   Academy    of 
Political  and  Social  Science,  American  Association  for  the 
Advancement    of    Science,    National    Municipal 
League,     Society     of     Chemical     In- 
dustry,  Etc. 


Public    Ownership    League    of    America 
CHICAGO,  ILLINOIS 
1918 


This  work  is  not  copyrighted.  Any  person  may 
print  from  it  at  pleasure.  It  is  intended  for  ser- 
vice rather  than  profit. 

ALBERT  M.  TODD. 


PREFACE 

Because  of  intimate  relations  early  in  life  with  the  railroads, 
telegraph  and  other  public  utilities,  the  conviction  came  to  me  that 
the  corporations  operating  them  were  not  only  usurping  functions 
which  rightly  belonged  to  the  government,  but  were  rapidly  becom- 
ing so  rich  and  powerful  as  to  be  a  serious  menace  to  liberty,  justice 
and  democracy,  in  defiance  of  which,  private  monopoly  ever  sought 
to  control  the  making  and  administration  of  law. 

Believing  it  to  be  the  duty  of  every  citizen  to  contribute  from 
his  powers  or  experiences  whatever  would  best  promote  the  com- 
mon good,  I  have  for  over  thirty  years  made  a  special  study  of 
public  utilities  under  both  public  and  private  ownership  in  our  own 
and  in  foreign  countries.  This  little  book,  while  giving  a  brief 
view  of  the  general  principles  involved  in  public  ownership,  is 
largely  a  plain  and  homely  contribution  to  a  discussion  of  but  one 
of  the  important  necessities  of  life.  The  facts  and  data  given 
have  been  gathered  through  many  years  of  personal  study  and  in- 
vestigation, both  in  our  own  and  foreign  countries,  and  are  sup- 
ported by  the  highest  official  authorities. 

As  one  who  turns  a  hopeful  face  toward  the  days  of  recon- 
struction ahead  of  us  when  the  spirit  of  genuine  democracy  shall 
rule  the  earth,  so  I  now  present,  as  amply  expressing  my  own  idea 
of  what  should  be  the  future  attitude  of  every  citizen,  the  following 
high  standard  of  real  citizenship  so  nobly  expressed  by  our  hon- 
ored President,  Woodrow  Wilson : 

"The  days  of  political  and  economic  reconstruction  which  are 
ahead  of  us  no  man  can  now  definitely  assess — but  we  know  this, 
that  every  program  must  be  shot  through  and  through  with  utter 
disinterestedness,  that  no  party  must  try  to  serve  itself,  but  every 
party  must  try  to  serve  humanity,  and  that  the  task  is  a  very  prac- 
tical one,  meaning  that  every  program,  every  measure  in  every 
program,  must  be  tested  by  this  question,  and  this  question  only: 
'IS  IT  JUST,  IS  IT  FOR  THE  BENEFIT  OF  THE  AVERAGE 
MAN,  WITHOUT  INFLUENCE  OR  PRIVILEGE;  DOES  IT 
EMBODY  IN  REAL  FACT  THE  HIGHEST  CONCEPTION 
OF  SOCIAL  JUSTICE  AND  OF  RIGHT  DEALING,  WITH- 
OUT RESPECT  TO  PERSON  OR  CLASS  OR  PARTICULAR 
INTEREST/  "— 

If  this  high  ideal  of  civic  consciousness  prevail,  service  not 
profit,  democracy  not  autocracy  will  rule  the  world.  What  we  sow 
today,  we  reap  tomorrow.  As  our  forefathers  gave  to  us  a  new 
nation,  so  the  opportunity  is  ours  to  guide  the  affairs  of  state  so 
that  the  priceless  heritage  of  liberty  shall  not  perish  from  the  earth. 
As  penned  in  the  opening  chapter  of  this  work,  "We  look  forward 
to  the  time,  which  we  hope  may  be  in  the  very  near  future,  when 


a 877 8 9 


IV 

through  the  patriotism  of  our  citizens  and  the  heroism  of  our 
soldiers  victory  shall  come  to  our  arms,  bringing  a  peace  that  shall 
be  wise  and  just  to  all  mankind  as  the  fruits  of  the  great  sacrifices 
America  and  her  allies  are  making  in  this  world  struggle.  Among 
the  fruits  of  such  peace,  those  who  believe  in  equality  of  oppor- 
tunity, civil  liberty  and  democracy,  hold  as  highly  essential  the 
public  ownership  and  operation  of  public  utilities  and  natural  re- 
sources, for  in  this  way  alone  can  control  be  'of  the  people,  by  the 
people  and  for  the  people.'  ' 

ALBERT  M.  TODD. 
Kalamazoo,  Michigan,  September  1st,  1918. 


EXPLANATION  OF  SOME  ABBREVIATIONS  AND  TERMS  USED  IN 
CONNECTION  WITH  THE  GAS  INDUSTRY 

B.  T.  U.— "British  Thermal  Unit." 

The  recognized  standard  for  measuring  heat.  One  B.  T.  U.  is  the 
measure  of  heat  required  to  raise  the  temperature  of  one  pound  avoirdu- 
pois of  water  one  degree  Fahrenheit. 

C.  P.— "Candle  Power." 

Illuminating  power  of  a  standard  sperm  candle,  six  of  which  weigh  one 
pound,  and  each  of  which  burns  120  grains  of  sperm  one  hour. 

C.  F.  or  Cu.  Ft.— "Cubic  Feet." 

Rates  for  selling  gas  are  based  on  1,000  cubic  feet. 

Calorific. 

Capable  of  producing  heat.     Thermal. 

Carbonize. 

To  convert  coal  into  coke  or  carbon  by  distillization,  for  removal  of 
the  gas. 

Corporation. 

The  municipal  government  in  British  cities  is  known  as  a  "Corporation," 
being  equivalent  to  the  word  "Municipality"  in  America.  Associations 
of  citizens  using  private  capital  are  known  in  Great  Britain  as  "Com- 
panies," being  thereby  equivalent  to  the  word  "Corporations"  as  under- 
stood in  America, 

Incandescent. 

Made  luminous  by  heat;  white  or  glowing  with  heat. 


CONTENTS. 

CHAPTER  I 

THE  BASIC  PRINCIPLES  OF  PUBLIC  OWNERSHIP  AND  A  SURVEY  OF 

ITS  WORLD  ACCOMPLISHMENT 9 

Principles  Underlying  Public  Ownership.  Rapid  Spread  of  Public 
Ownership.  Public  Ownership  a  Natural  Governmental  Function 
and  Necessary  to  Secure  Democracy.  Success  of  Public  Ownership 
in  Europe.  Public  Ownership  Brings  Justice  to  Labor.  Public 
Ownership  in  Accord  with  our  Constitution. 

CHAPTER  II 

EARLY  HISTORY  AND  DEVELOPMENT  OF  THE  GAS  INDUSTRY 16 

First  Practical  Use,  1792.  Experimental  Lighting,  1726.  First 
Commercial  Patent,  1802.  First  Public  Street  Lighting,  1807.  Im- 
provements in  Methods  and  Equipment.  Evolution  of  Gas  Burners. 
Candle  Power  and  Heat  Value.  Advent  of  the  Gas  Engine.  Gas 
Applied  to  Motor  Vehicles.  A  Boon  to  Civilization.  Water  Gas. 
Natural  Gas. 

CHAPTER  III 

THE  PRESENT  SCOPE  OF  THE  GAS  INDUSTRY 21 

Extracts  from  U.  S.  Bureau  of  the  Census  on  "Manufacture  of  Gas," 
Printed  1917.  The  Situation  Since  1914.  Growth  of  Municipal 
Ownership  of  Gas  Plants  in  the  United  States.  Data  Summarized 
from  "Brown's  Directory  of  American  Gas  Companies,  1917."  List 
of  Municipal  Gas  Plants  by  City  and  State,  in  the  United  States 
and  Canada,  Giving  Population  of  City  and  of  District  Supplied, 
Compiled  from  "Brown's  Directory,  1917." 

CHAPTER  IV 

How  GAS  Is  MADE — A  BRIEF  SUMMARY 26 

Carbonizing  or  Coal  Gas.  Carburetted  Water  Gas.  Relation  of 
Candle  Power  and  British  Thermal  Units  to  the  Quality  and  Use- 
fulness of  Gas.  Products  from  a  Ton  of  Coal. 

CHAPTER  V 

"FINANCING"  A  TON  OF  COAL,  AND  PROFITS  ON  GAS 30 

Financing  a  Ton  of  Coal.  Profits  on  Gas — Extract  from  Edward 
W.  Bemis,  Ph.  D.  in  "Municipal  Monopolies."  Cost  and  Profit. 
Boston  Consolidated  Gas  Company  Files  Schedule  of  Manufacturing 
Costs.  Cost  of  Making  Carburetted  Water  Gas — "Gas  Record." 
Cost  of  Making  Coal  Gas— "Gas  Record."  The  Gas  •  Situation  in 
Philadelphia.  65  Cent  Gas  to  the  Consumer  a  Possibility  by  a  Fair 
Deal.  Extracts  from  the  1915  Report  of  the  Bureau  of  Gas  of  the 
City  of  Philadelphia,  Judson  C.  Dickerman,  Chief,  Giving  Cost 


VI 

of  Producing  Gas  in  Various  Cities  of  the  United  States.  Gas 
Facts  as  Presented  by  the  Bureau  of  Gas  of  Philadelphia.  "Con- 
solidation of  Gas  Companies  Forces  up  Gas  Rates" — Quotation  from 
Edmund  J.  James,  Ph.  D.  "Effects  of  Public  Control  of  Private 
Management  in  England" — Quotation  from  Edward  W.  Bemis  in 
"Municipal  Monopolies."  Other  Sources  of  Information  on  "Cost" 
and  "Profit"  in  this  Work. 

CHAPTER  VI 

MUNICIPAL  GAS  WORKS  IN  VIRGINIA 43 

Richmond  Municipal  Gas  Works.  A  Record  of  Achievement. 
$271,869  Profit  on  80  Cent  Gas  in  1916.  Extracts  from  1916  Report 
of  Richmond,  Va.  "Early  History  of  Richmond  Municipal  Gas 
Works,"  by  Edmund  J.  James,  Ph.  D.  "Labor  and  Wages  in  the 
Richmond  Municipal  Gas  Plant,"  Report  by  National  Civic  Federa- 
tion. Rates  per  1,000  Cubic  Feet  Charged  by  Municipal  and  Private 
Gas  Plants  in  Virginia.  Beneficial  Effect  of  Municipal  Rates  on 
Private  Rates. 

CHAPTER  VII 

MUNICIPAL  GAS  WORKS  IN  MINNESOTA 50 

Municipal  Ownership  of  Gas  in  Duluth,  Minn.  Extracts  from  1917 
Official  Report.  Rates  Per  1,000  Cubic  Feet  Charged  by  Municipal 
and  by  Private  Gas  Plants  in  Minnesota. 

CHAPTER  VIII 

CITIZENS  GAS  COMPANY  OF  INDIANAPOLIS 53 

A  Model  Franchise  of  a  Model  American  Gas  Company  Which 
is  Paving  the  Way  for  Municipal  Ownership.  Gas  at  55  Cents 
per  1,000  Cubic  Feet  the  Lowest  Price  in  the  United  States.  Pro- 
vision for  Municipal  Ownership.  60  Cent  Gas  of  600  British  Ther- 
mal Units.  Accounts  to  be  Made  Public.  Stock  to  be  Sold  at  Public 
Auction.  A  By-Product  Plant.  Extracts  from  Report  of  Citizens 
Gas  Company  for  Year  Ending  December  31,  1917,  Giving:  Public 
Service,  Operating  Results,  Comparative  Statistics,  Enlargements, 
Revenue  Statement  for  Twelve  Months  Ending  December  31,  1917, 
Dividends  Paid  and  Declared.  Extracts  from  Franchise  of  Citizens 
Gas  Company  of  Indianapolis,  Giving:  Capital  Stock,  Publicity  of 
Reports,  Trustees,  Removal  of  Trustees,  Disposal  of  Earnings, 
Transfer  of  Property  to  City,  Bond  of  Indemnity,  Materials,  Qual- 
ity, Quality  of  Gas,  Price  of  Gas,  Extension  of  Lines — Forfeiture, 
Test  of  Meters. 

CHAPTER  IX 

THE  FIGHT  FOR  MUNICIPAL  GAS  IN  KALAMAZOO  WITH  AN 

INVESTIGATION  OF  COSTS  AND  PROFITS 62 

History  of  the  Kalamazoo  Gas  Fight.  Report  of  William  New- 
bigging  on  "The  Gas  Supply  of  the  City  of  Kalamazoo,  and  on  the 
Proposal  to  Establish  a  Municipal  Plant."  This  Report  Covers  the 
Following:  Physical  Value;  Receipts  and  Expenditures;  Gross 
Earnings;  Gross  Earnings  Less  Operating  Expenses;  Net  Cost  of 
Gas  in  Holder;  Distribution;  Utilization  and  Commercial  Expense; 
General  and  Miscellaneous  Expenses;  Capital  Charges— Assets ; 
Liabilities ;  Rate  at  Which  Company  Should  Supply  Gas  Under  New 
Franchise,  If  Such  be  Granted;  Proposed  Municipal  Plant. 


Vll 

CHAPTER  X 

MUNICIPAL  OWNERSHIP  OF  GAS  WORKS  IN  GREAT  BRITAIN 74 

"Social  and  Financial  Benefits  of  Municipal  Ownership  in  Eng- 
land."— Quotation  from  Arthur  Silverthorne.  Municipal  Gas  in 
Great  Britain,  a  Lesson  in  Efficiency,  Justice  and  Democracy.  The 
Municipal  Gas  Works  of  Widnes,  England,  A  Triumph  of  Municipal 
Ownership.  Best  Quality  Gas  Costing  16  Cents  per  1,000  Cubic 
Feet  Supplied  to  Consumers  during  1915  at  22  Cents  to  24  Cents 
for  Lighting  and  16  Cents  for  Power  Purposes,  Yielding  Large 
Profit  to  the  City.  Municipal  Gas  Works  of  Birmingham,  England. 
Municipal  Ownership  of  Gas  in  Manchester,  England — Data  Given 
for  1913,  1914  and  1916. 

CHAPTER  XI 

MUNICIPAL  OWNERSHIP  IN  GREAT  BRITAIN  (CONTINUED).     COM- 

PARATVE  RESULTS  IN  EFFICIENCY  AND  SOCIAL  JUSTICE 81 

Statistics  from  "Field's  Analysis  of  the  Principal  Gas  Undertakings 
in  England,  Scotland  and  Ireland,  1913."  Comparison  of  Accounts, 
1913  and  1916,  of  Both  Municipal  and  Private  Plants  in  English 
Provincial  Towns.  Summary  of  Receipts  and  Expenses  of  Municipal 
and  Private  Plants  in  English  Provincial  Towns,  1913  and  1916, 
per  1,000  Cubic  Feet  Sold.  Conclusions  Respecting  the  Compara- 
tive Efficiency  and  Charges  for  Gas  Under  Public  and  Private 
Ownership.  Higher  Efficiency  of  Municipal  Ownership: 
Better  Quality  of  Gas;  Cheaper  Selling  Price;  Higher  Wages  Paid; 
More  Gas  and  Coke  Obtained  from  a  Ton  of  Coal ;  Less  Gas  Unac- 
counted for;  Lower  Charges  for  Coke;  Low  Meter  Rents;  More 
Extensive  Service;  Attitude  toward  Profit;  More  Substantial 
Plants;  More  Adequate  Lighting  of  Public  Places;  Universal 
Satisfaction. 
Municipal  Ownership  in  New  Zealand. 

CHAPTER  XII 
MUNICIPAL  OWNERSHIP  IN  GERMANY 90 

CHAPTER  XIII 

OPINIONS  RESPECTING  PUBLIC  OWNERSHIP  BY  EMINENT  AUTHOR- 
ITIES     92 

"Corporate   Plots   to   Strangle   Public   Opinion" — Hon.    Newton   D. 

Baker. 

"The  Way  Out — Municipal  Ownership" — Hon.  Frederic  C.  Howe. 

"The    Relation    of    Public    Service    Corporations    to    the    Public" — 

Delos  F.  Wilcox,  Ph.  D. 

"The  Profits  of  Private  Monopoly"— Frank  Parsons,  B.  C.  E.,  Ph.  D. 

"Conclusions  Reached" — Edmund  J.  James,  Ph.  D. 

APPENDIX 

I 

CONTINUED    SUCCESS   OF    MUNICIPAL   OWNERSHIP    IN    GREAT 
BRITAIN  IN  1918 101 

II 
PUBLIC  SERVICE  PROFITEERS  IN  WAR  TIME.  .  .  .102 


Vlll 

III 

PROFLIGACY  OF  AMERICAN  RAILWAY  MANAGEMENT  UNDER  PRI- 
VATE OWNERSHIP 103 

IV 

BELFONTAINE'S  NEW  MUNICIPAL  GAS  PLANT 106 

V 

MODEL  PROVISIONS  RESPECTING  FRANCHISES  AND  PUBLIC  UTILI- 
TIES IN  THE  NEW  CHARTER  OF  THE  CITY  OF  KALAMAZOO.  .  .111 

VI 

BRIEF  :  RESOLVED  THAT  PUBLIC  UTILITIES  SHOUED  BE  PUBLICLY 
OWNED  AND  OPERATED 117 

VII 

CONSTITUTION  OF  THE  PUBLIC  OWNERSHIP  LEAGUE  OF  AMERICA.  119 


CHAPTER  I. 

THE  BASIC  PRINCIPLES  OF  PUBLIC  OWNERSHIP  AND  A  SURVEY 
OF  ITS  WORLD  ACCOMPLISHMENT. 

"This  country  and  all  that  is  within  it  belongs  to  the  people  who  inhabit 
it." — Abraham  Lincoln. 

"Real  public  ownership  is  the  very  essence  of  Democracy.  Instead  of 
debasing  human  nature  by  conflict  and  corruption,  and  dividing  men  into 
masters  and  mastered,  it  brings  men  together  in  a  union  of  interest,  accords 
to  all  a  share  in  the  development  arising  from  the  exercise  of  judgment 
and  discretion  in  the  control  of  business  affairs,  and  affords  the  cooperative 
conditions  necessary  for  the  highest  traits  of  conscience  and  character." — 
Prof.  Frank  Parsons,  Boston  Law  School,  in  "The  City  for  the  People." 

The  principles  underlying  public  ownership  may  be  divided  into 
two  classes.  One  is  connected  with  ideal  government  in  its  relation 
to  civil  liberty,  democracy,  and  equality  of  opportunity.  This  we 
call  "political  justice."  The  other  relates  to  providing  those  ma- 
terial things  and  services  necessary  to  our  welfare  and  happiness 
which  we  call  "economic  justice."  Both  are  closely  interwoven, 
and  together  they  form  the  sum  of  human  justice  which  we  know 
as  "social  justice,"  a  term  inclusive  of  all  the  relations  of  mankind 
in  an  ideal  commonwealth. 

"Justice  is  the  rightful  sovereign  of  the  world,"  said  Pindar  sev- 
eral centuries  before  Christ.  And  Aristotle,  writing  in  the  same 
era,  held  justice  to  be  the  "practice  of  virtue  toward  others."  In 
later  times  when  Rome  swayed  the  world,  the  Emperor  Justinian, 
in  the  beginning  of  his  "Institutes  of  Roman  Law,"  defined  justice 
as  "the  eternal  and  unchanging  desire  to  give  to  every  man  his  due." 

In  modern  ethics,  liberty  and  equality  are  essential  principles 
of  justice  as  determined  by  social  inheritance.  But  to  conceive 
rightly  the  trend  of  social  relations,  a  broad  comprehension  of  eco- 
nomic conditions  is  necessary.  It  was  this  desire  to  study  questions 
of  justice  and  civil  liberty  which  led  the  author  many  years  ago 
to  seek  information  concerning  the  great  public  utilities  and  their 
relation  to  national  life  and  public  welfare. 

Constant  and  intimate  relations  for  a  number  of  years  with  the 
railway,  telegraph,  telephone,  express  and  various  other  public  util- 
ities had  brought  valuable  experience  to  the  writer  in  his  business 
relations  as  manufacturer  and  shipper.  Investigations  carried  on 
while  a  member  of  the  National  House  of  Representatives  added 
to  this  experience  facts  of  an  official  nature  which  but  increased 
the  determination  to  prove  or  disprove  certain  conclusions  which 
were  forced  upon  him.  Repeated  visits  abroad  gave  opportunity 
to  investigate  personally  the  conditions  under  which  public  utilities 
were  being  operated  in  foreign  lands  under  both  public  and  private 


10 

ownership.  The  last  visit  occupied  fourteen  months  in  the  years 
1912-1913,  during  which  time  fourteen  countries  were  visited. 
These,  together  with  those  investigated  during  other  trips,  included 
Austria,  Bavaria,  Belgium,  Denmark,  Egypt,  England,  France, 
Greece,  Holland,  Italy,  Norway,  Prussia,  Saxony,  Scotland,  Sweden, 
and  Switzerland. 

Rapid  Spread  of  Public  Ownership. 

All  of  these  countries,  sixteen  in  number,  publicly  own  and  op- 
erate their  telephone  and  telegraph  systems  as  parts  of  the  postal 
service;  ten  publicly  own  and  operate  their  entire  railway  systems, 
four  own  them  in  part,  while  only  two  (England  and  Scotland)  have 
been  operating  their  railroads  entirely  under  private  ownership.  Since 
the  outbreak  of  the  present  war,  the  government  of  these  two  coun- 
tries has  taken  possession  of  the  railroads  also,  and  without  doubt 
will  assume  actual  and  permanent  government  ownership  in  the  near 
future.  Russia,  Japan,  Australia,  and  New  Zealand  also  publicly 
own  and  operate  their  entire  railroad  systems,  while  China,  Mexico, 
and  the  countries  of  South  America  own  theirs  in  whole  or  in  part. 
All  of  these  own  their  telephone  and  telegraph  systems  as  well,  and 
many  countries  own  the  majority  of  their  municipal  utilities.  The 
United  States  of  America  is  the  only  nation  in  the  world  which 
does  not  publicly  own  and  operate  its  telephone  and  telegraph  sys- 
tems as  government  functions,  and  will  have  the  unenviable  distinc- 
tion of  being  the  only  civilized  country  controlled  by  special  privi- 
lege should  she  alone  decide  to  continue  this  intolerable  system  of 
"invisible  government." 

It  may  have  been  this  tendency  to  be  ruled  by  private  monopoly 
which  led  Ambassador  Bryce  to  declare  in  his  "American  Com- 
monwealth," "In  England,  we  have  the  form  of  a  monarchy  with 
the  spirit  of  democracy;  while  in  America  there  exists  the  form  of 
a  democracy  with  the  spirit  of  monarchy."  This  statement  is  un- 
fortunately too  true;  and  it  is  due  to  the  fact  that  in  England  as 
well  as  in  all  the  other  countries  of  Europe,  public  utilities  are 
largely  owned  and  operated  by  the  people,  their  operation  being  con- 
sidered necessary  and  natural  governmental  functions.  Those  few 
minor  undertakings  which  are  allowed  to  be  privately  owned  in  those 
countries  are  considered  as  public  trusts  which  are  required  to  give 
impartial  service  and  make  full  accounting  to  the  people. 

Public  Ownership  a  Natural  Government  Function  and  Necessary  to 
Secure  Democracy. 

In  America,  on  the  other  hand,  the  private  monopolies  which 
own  and  control  the  great  public  utilities  have  practically  become 
the  financial  and  political  masters  of  the  people,  for,  by  means  of 
unjust  rates  made  possible  by  fictitious  capitalization,  dishonest 
financing  and  illegal  practices,  they  have  amassed  great  wealth  and 


11 

have  grown  so  powerful  as  largely  to  control  law  and  government. 
By  secret  rates  and  rebates  they  have  crushed  out  competition  and 
obtained  monopoly.  By  interlocking  directorates  and  combination 
of  capital  they  have  controlled  or  defied  law  and  evaded  regulation. 
Through  control  of  much  of  the  press  and  of  universities,  they  have 
influenced  public  opinion,  largely  controlling  nominations  and  elec- 
tions to  public  office,  ultimately  directing  the  making  and  adminis- 
tration of  law. 

When  a  few  men  thus  control  the  great  functions  of  government, 
that  equality  of  opportunity  which  is  fundamental  to  democracy 
cannot  exist.  There  can  be  no  function  of  government  more  natural 
and  necessary  to  the  promotion  of  general  prosperity  and  happiness 
than  the  public  ownership  and  operation  of  all  those  agencies  which 
contribute  to  the  public  good  and  which  by  their  nature  are  monop- 
olies. And  these  include  not  only  the  public  utilities  devised  by 
man,  but  those  vast  resources  of  nature  which  the  Almighty  placed 
above  and  below  the  earth  for  the  service  of  all  his  creatures. 

Since  our  National  Constitution  was  written  a  century  and  a 
quarter  ago,  human  genius  has  harnessed  nearly  all  the  forces  of 
nature  in  so  many  ways  that  there  is  scarcely  a  function  in  our 
daily  life  that  is  not  performed  by  them,  nor  a  condition  of  life  which 
they  have  not  revolutionized.  Then,  we  could  speak  only  within  the 
radius  of  our  voices;  now,  we  speak  from  ocean  to  ocean.  Then, 
courier,  stage  or  slow  sailing  boat  carried  our  written  messages; 
now,  a  few  seconds  suffice  to  encircle  the  globe.  Then,  our  persons 
and  the  products  of  our  farms  and  factories  traveled  on  land  at  the 
rate  of  twenty  miles  a  day;  now,  our  fastest  trains  exceed  a  thou- 
sand. 

As  the  Creator  of  the  Universe  gave  to  all  mankind  from  the 
foundation  of  the  world  to  the  end  of  time,  the  air,  the  water,  the 
sunlight,  the  heat,  the  treasures  of  the  earth  with  all  their  powers 
and  possibilities ;  so  it  devolves  upon  the  city,  the  state  and  the  na- 
tion to  preserve  inviolate  to  its  citizens  the  widest  and  freest  use  of 
these  gifts  for  the  common  welfare.  This  cannot  be  done  where 
private  monopoly  exists,  for  one  man  or  a  group  of  men  usurp  those 
rights  which  belong  to  all. 

Success  of  Public  Ownership  in  Europe. 

When  traveling  in  France  in  1875,  I  first  observed  over  the 
entrance  of  all  the  churches  and  other  public  buildings  the  motto 
of  the  French  Revolution,  "LIBERTY,  EQUALITY,  FRATERNITY." 
These  constitute  the  essence  of  "political  justice."  Evidences 
of  "social  justice"  were  likewise  apparent  here  as  well  as  elsewhere, 
for,  under  the  reign  of  public  ownership  of  public  utilities,  one  was 
deeply  impressed  with  the  excellence  of  the  service,  the  low  rate  of 
charge,  the  efficiency  and  interest  displayed  by  the  managers  and 
wage  earners,  all  of  which  exerted  an  influence  for  good  upon  cit- 
izenship and  government. 


12 

In  order  to  secure  indisputable  evidence  of  the  success  of  public 
ownership  with  which  to  disprove  misstatements  continually  being 
made  in  the  press  and  in  pamphlets  issued  at  the  instigation  of  pri- 
vate companies  in  America,  I  procured  a  large  and  valuable  collec- 
tion of  official  reports  and  data  of  an  absolutely  authoritative  nature, 
besides  personally  taking  over  500  photographs  of  the  various  util- 
ities in  operation  in  many  countries.  To  this  collection  I  added 
several  hundred  photographs  taken  by  official  photographers. 

This  interesting  collection  contains  street  railway  tickets  from 
many  cities  and  countries  of  Europe,  with  fares  of  but  one  cent  for 
moderate  distances,  and  averaging  but  one  and  five-eighths  cents  for 
all  distances.  These  gave  superior  service  from  the  receipts  of 
which  each  city  made  a  large  profit  applied  for  reducing  taxation 
or  swelling  the  fund  of  the  "Common  Good." 

In  England  the  very  highest  quality  of  coal  gas  was  being  sup- 
plied under  municipal  ownership,  in  some  instances,  at  rates  as 
low  as  24  cents  per  1,000  cubic  feet.  And  even  at  this  rate,  a 
profit  was  made,  owing  to  honest  and  efficient  administration. 

Electricity  was  everywhere  supplied  at  rates  lower  than  those 
charged  by  private  companies  in  America,  notwithstanding  the  fact 
that  in  most  of  these  countries  there  is  but  little  water-power. 

Local  telephone  calls  were  two  cents,  and  'phones  in  homes  and 
offices  cost  less  than  half  the  American  rate. 

Checking  of  baggage  or  parcels  at  the  railway  station  was  only 
two  cents,  as  against  ten  cents  in  the  United  States.  And  all  these 
public  utilities  were  efficiently  administered  and  gave  a  profit  to 
the  government. 

Triumphs  of  Public  Ownership  in  Switzerland. 

The  republic  of  Switzerland  well  illustrates  the  beneficent  results 
of  public  ownership  which  prevail  in  the  various  countries  men- 
tioned. Traveling  through  this  "Mountain  Republic/'  one  is  im- 
mediately impressed  with  the  industry,  dignity,  and  the  liberty-lov- 
ing spirit  of  the  people,  evidenced  by  their  every  act  and  word.  The 
locomotive  engineers,  the  conductors,  the  firemen,  the  brakemen  and 
the  men  who  construct  and  maintain  the  tracks  know  that  they  are 
not  mercenary  employees,  but  are  part  owners  of  the  railways  and 
of  the  other  public  works,  and  as  such,  they  take  a  just  pride  and 
interest  in  their  duties  and  labors. 

Under  this  system,  strikes  and  lockouts  are  unknown,  for  each 
employee  realizes  that  in  rendering  his  best  service  he  is  rendering 
a  service  to  the  State,  and  as  a  citizen  of  the  State,  to  himself.  It 
will  thus  be  readily  seen  how  with  each  employee  giving  his  best 
possible  endeavor  and  each  setting  an  example  to  those  operating 
the  utilities  (in  all  of  which  each  "citizen-employer"  has  a  personal 
interest),  the  State  secures  much  higher  efficiency  and  service  with 
proportionate  decrease  in  cost  to  the  public,  and  relative  increase 


13 

in  wages.  As  the  fictitious  salaries  paid  in  America  to  presidents 
of  the  public  service  corporations  with  the  intent  of  absorbing  the 
earnings  of  the  utility  find  no  counterpart  in  Switzerland,  and  as 
all  officers  and  employees  are  co-workers  under  civil  service  rules, 
"soldiers  for  the  common  good,"  private  graft  and  plunder  are  im- 
possible and  unknown. 

Illustrating  the  results  under  this  system,  I  purchased  a  ticket 
for  42  days  continuous  or  intermittent  rides  in  Switzerland  at  the 
pleasure  of  the  holder,  over  any  or  all  of  the  railways  and  steam- 
boats, for  the  equivalent  of  $27,  or  at  the  rate  of  about  67  cents  a 
day.  Tickets  are  also  issued  for  three,  six,  and  twelve  months  at 
still  lower  rates;  and  yet,  though  these  roads,  in  some  places  tun- 
neled through  giant  mountains,  skirting  precipitous  cliffs,  and  span- 
ning wild  canyons  at  dizzy  heights,  cost  a  million  dollars  per  mile 
to  construct  in  places,  and  averaging  over  five  times  the  actual  cost 
of  the  American  railways,  the  results  are  so  highly  satisfactory  that 
the  Republic  is  constantly  building  extensions  as  rapidly  as  possible. 

Results  in  efficiency  and  economy  equally  marvelous  as  com- 
pared with  our  corporate-owned  systems  prevail  in  the  telegraph, 
telephone,  express  and  street  railways.  In  comparison  with  this, 
one  wonders  how  the  American  people,  in  the  face  of  the  reckless 
speculating  and  plundering  of  the  public  utilities  by  so-called  "high 
financiers,"  can  be  induced  to  permit  the  functions  of  their  life  to 
be  thus  controlled  and  abused.  It  seems  incredible  that  intelligent 
men  engaged  in  manufacturing  and  other  legitimate  lines  of  business 
should  not  join  the  farmers  and  wage  earners  in  the  demand  for 
public  ownership.  Under  the  present  corporate  system  the  rule 
of  the  railroads  is  to  charge  "all  the  commodity  will  bear,"  thus 
limiting  both  the  profits  of  the  producers  and  the  power  of  the 
consumers  to  pay,  while  they  levy  the  largest  tax  possible  without 
entirely  killing  the  industry. 

Public  Ownership  Brings  Justice  to  Labor. 

The  rule  prevailing  in  both  municipal  and  national  utilities  in 
countries  where  public  ownership  exists,  is  that  labor  shall  be  paid 
not  less  than  the  full  wages  accorded  by  private  companies  for  like 
service,  nor  less  than  the  amount  fixed  by  labor  unions.  In  many 
countries  a  minimum  wage  law  exists  in  reference  to  government 
employees  upon  the  railroads,  telegraph,  telephone  systems,  etc.,  and 
this  rule  exists  in  principle  under  municipal  ownership  in  nearly 
all  cities.  . 

In  Great  Britain  wages  paid  municipal  employees  on  the  tram- 
ways, gas  and  electric  utilities  were  about  $1.75  per  day,  skilled 
labor  being  higher.  And  these  wages  have,  of  course,  risen  rapidly 
since  the  war.  When  it  is  remembered  that  the  families  of  em- 
ployees get  their  street  car  tickets,  gas  and  other  services  at  about 
one-third  the  cost  in  American  cities,  their  wages,  when  measured 


14 

in  public  service  to  their  families,  will  be  seen  to  be  more  than  dou- 
ble those  paid  in  America.  For  instance,  a  motorman  or  other 
workman  can  buy  one  hundred  rides  of  the  average  length  as  in  the 
United  States,  or  one  hundred  and  seventy-five  rides  of  nearly  two 
miles  each,  for  one  day's  wage,  whereas  the  American  employee 
will  receive  but  fifty  rides  for  the  same  money.  One  day's  wage  in 
England  and  Scotland  will  buy  on  the  average  over  4,000  cubic 
feet  of  gas  of  the  best  quality,  double  the  amount  derived  in  Amer- 
ica for  the  same  work,  although  the  wages  are  higher  as  measured 
in  money. 

Strikes  and  labor  trouble  of  any  kind  are  so  extremely  rare  as  to 
be  almost  unknown  under  public  ownership,  for  the  public  has  no 
interest  nor  desire  to  treat  its  own  "citizen  employees"  otherwise 
than  with  generosity  and  justice.  It  desires  to  receive  the  best 
service  and  is  glad  to  give  a  full  equivalent.  The  sole  consideration 
under  public  ownership  is  to  secure  to  everyone  perfect  service  un- 
der just  conditions,  while  under  private  ownership  as  practiced  in 
America,  the  sole  motive  is  to  obtain  private  profit ;  and  even  where 
good  service  is  given  the  motive  remains  the  same. 

Under  public  ownership,  laws  and  agreements  are  entered  into 
providing  for  conciliation,  arbitration,  etc.,  by  which  all  questions 
are  usually  settled  quickly  and  amicably.  Employees  being  partners 
in  the  business  and  enjoying  the  public  service  for  themselves  and 
their  families  have  no  motive  to  destroy  that  which  tends  to  their 
own  welfare.  The  facts  already  given  would  seem  sufficient  to 
show  that  a  degree  of  social  justice  greater  than  is  known  elsewhere 
prevails  where  public  ownership  exists,  for  the  public  as  consumers 
secure  the  necessities  of  life  upon  terms  far  more  just  than  could 
be  otherwise  possible,  while  the  employees  receive  better  wages  and 
better  treatment  as  well. 

Public  Ownership  in  Accord  With  Our  Constitution. 

The  greatest  statesman  and  constitutional  lawyers  of  every  dem- 
ocratic country  agree  in  the  view  that  it  is  not  only  the  right  but  the 
duty  of  government,  national,  state  and  municipal  to  perform  every 
function  which  is  necessary  to  protect  and  extend  the  rights,  oppor- 
tunities and  happiness  of  its  citizens.  In  fact,  this  was  the  supreme 
purpose  of  the  founders  of  our  Republic,  and  in  order  to  secure  and 
protect  these  rights,  they  placed  at  the  head  of  our  National  Con- 
stitution the  following  preamble : 

"We,  the  people  of  the  United  States,  in  order  to  form  a  more  perfect 
union,  establish  justice,  insure  domestic  tranquility,  provide  for  the  common 
defense,  promote  the  general  welfare,  and  secure  the  blessings  of  liberty  to 
ourselves  and  to  our  posterity,  do  ordain  and  establish  this  Constitution  for 
the  United  States  of  America." 

It  must  be  noted  that  they  sought  to  provide  and  secure  to  pos- 
terity— the  people  of  today — all  the  blessings  which  accompany  civil 


IS 

liberty.  Should  our  present  lawmaking  power  refuse  in  this  great 
crisis  to  provide,  in  letter  as  well  as  in  spirit,  progressive  legislation 
necessary  to  carry  out  the  fundamental  principles  of  the  Constitu- 
tion, there  is  left  an  appeal  to  the  citizenship  which  our  martyred 
president,  Abraham  Lincoln,  stated  in  the  following  words : 

"This  country  and  all  its  institutions  belong  to  the  people  who  inhabit  it ; 
and  whenever  they  shall  tire  of  their  existing  government  they  have  the 
Constitutional  right  to  amend  it,  or  the  revolutionary  right  to  overthrow  it. 

If,  then,  this  principle  that  the  will  of  the  people  should  rule, 
found  its  advocates  among  makers  of  laws  and  constitutions  through 
the  centuries  when  the  conditions  of  society  were  more  simple  than 
now,  and  when  nations  owned  and  operated  their  own  highways, 
post  offices,  etc.,  is  it  not  much  more  natural,  necessary  and  just 
that  these  same  principles  of  public  ownership  should  be  extended 
under  the  present  more  complicated  conditions  of  society,  when 
the  various  forces  of  nature  are  imperatively  called  upon  to  render 
service  ?  Justice  replies,  "Yes !" 

We  are  living  in  an  era  of  evolution  and  revolution.  Democracy 
must  triumph  over  greed.  That  "invisible  government"  of  monopoly 
which  sets  at  nought  the  will  of  the  people  through  the  combined 
power  of  the  railways,  telegraph,  telephone,  gas,  electricity,  street 
railways  and  other  public  utilities  must  be  done  away  with  in  the 
name  of  liberty. 

We  who  believe  that  the  public  ownership  and  operation  of  all 
public  utilities  which  by  their  nature  are  necessary  to  the  welfare 
and  happiness  of  the  people  are  natural  government  functions,  be- 
lieve that  the  time  is  ripe  for  action.  The  rightful  solution  of  the 
question  is  not  based  upon  the  exigencies  of  the  hour  alone.  Gov- 
ernment operation  of  the  railroads  and  of  other  national  utilities 
should  not  end  with  the  close  of  the  war.  We  look  forward  to  the 
time,  which  we  hope  may  be  in  the  very  near  future,  when  through 
the  patriotism  of  our  citizens  and  the  heroism  of  our  soldiers  victory 
shall  come  to  our  arms,  bringing  a  peace  that  shall  be  wise  and  just 
to  all  mankind  as  the  fruits  of  the  great  sacrifices  America  and  her 
allies  are  making  in  this  world  struggle.  Among  the  fruits  of  such 
peace,  those  who  believe  in  equality  of  opportunity,  civil  liberty  and 
democracy,  hold  as  highly  essential  the  public  ownership  and  opera- 
tion of  public  utilities  and  natural  resources,  for  in  this  way  alone 
can  control  be  "of  the  people,  by  the  people  and  for  the  people." 


CHAPTER  II. 
EARLY  HISTORY  AND  DEVELOPMENT  OF  THE  GAS  INDUSTRY. 

A  systematic  history  of  the  origin  and  development  of  an  in- 
dustry of  such  magnitude  as  has  been  attained  by  the  production  of 
gas  would  be  replete  with  interest;  but  since  the  chief  purpose  of 
this  work  is  to  place  before  the  public  the  salient  facts  relating  to 
the  gas  problem,  especially  those  concerning  its  economic  and  po- 
litical phases  and  their  relation  to  the  general  welfare,  a  brief  his- 
torical sketch  including  some  of  the  most  prominent  features  only 
must  suffice. 

The  manufacture  and  distribution  of  artificial  gas,  supplying  one 
of  the  prime  necessities  of  life  to  the  inhabitants  of  cities  and  vil- 
lages, has  become  one  of  the  important  industries  of  the  world  which 
is  still  in  the  infancy  of  its  development.  Although  its  progress  has 
been  slow  up  to  the  present,  the  future  stages  of  its  advancement 
will  be  more  rapid. 

First  Practical  Use,  1792. 

Like  the  steam  engine,  railways,  electric  telegraph,  telephone, 
light  and  power,  and  many  other  important  inventions  which  have 
revolutionized  civilization,  the  successful  application  of  gas  to  hu- 
man needs  was  perfected  in  the  century  recently  closed.  The  honor 
of  being  the  first  to  employ  coal  gas  successfully  as  an  illuminating 
agent  is  generally  given  to  an  Englishman,  William  Murdock,  by 
name,  who  about  1792  actually  used  it  for  such  purpose  at  Bedruth 
in  Cornwall,  England.  After  continued  experimentation  for  about 
ten  years  he  succeeded  in  demonstrating  its  great  possibilities  by 
lighting  the  steam  engine  factory  of  Boulton,  Watt  &  Co.  at  Soho 
in  Birmingham  in  1802. 

But  though  Murdock  was  the  first  to  produce  and  apply  gas  in 
actual  practice  successfully,  its  presence  in  coal  was  known  as  early 
as  1691  by  Dr.  John  Clayton  of  Kildare,  Ireland,  who  collected  in 
bladders  gas  which  he  distilled  from  coal,  and  by  pricking  the  blad- 
der and  applying  a  match  proved  it  to  contain  luminous  qualities. 

Experimental  Lighting,  1726. 

In  1726  Stephen  Hales  first  measured  and  published  the  amount 
of  gas  obtained  from  a  given  quantity  of  coal,  when  in  a  laboratory 
experiment  he  produced  180  cubic  feet  of  "inflammable  air"  from 
158  grains  of  coal.  Later  in  1785,  Professor  Jean  Minckelers  of  the 
Universities  of  Leyden  and  Maestricht,  experimentally  lighted  his 
lecture  room  with  coal  gas,  but  developed  no  practical  methods  for 


17 

its  production  and  use.  Four  years  later  Lord  Dundonald,  while 
distilling  coal  for  the  purpose  of  obtaining  tar,  collected  some  of 
the  escaping  gas  with  which  he  lighted  the  nearby  Hall  of  Culross 
Abbey,  Scotland. 

First  Commercial  Patent,  1802. 

The  idea  that  coal  gas  might  be  made  of  commercial  value  ap- 
pears to  have  first  occurred  to  Phillippe  Le  Bon,  a  Frenchman,  who 
secured  a  patent  and  demonstrated  it  publicly  in  Paris  in  1802. 
Among  those  who .  witnessed  the  exhibition,  was  a  German  named 
F.  A.  Winsor  who  attempted  to  buy  the  secret  and  the  exclusive 
right  to  operate  it  in  Germany;  but  the  inventor  refused  to  sell. 
Winsor  accordingly  applied  himself  vigorously  to  investigation  and 
soon  duplicated  the  Frenchman's  discovery.  Foreseeing  its  com- 
mercial possibilities,  he  made  an  exhibition  of  the  working  of  his 
process  at  the  Lyceum  Theatre,  London,  in  1804,  and  attempted  to 
incorporate  a  company,  but  without  immediate  success,  as  his  patent 
was  opposed  by  Murdock  who  claimed  priority  of  invention. 

First  Public  Street  Lighting,  1807. 

In  1807,  Winsor  first  introduced  public  street  lighting  by  gas 
in  Pall  Mall,  one  of  the  western  districts  of  London,  and  two  years 
later  he  again  applied  to  Parliament  for  consent  to  incorporate  the 
"National  Heat  and  Light  Companv,"  which  was  at  first  refused; 
but  finally,  after  eliminating  part  of  his  claims,  Parliament  in  1812 
consented  to  the  incorporation  of  a  company  under  the  title  of  "The 
Chartered  Gas  Light  and  Coke  Companv."  This  company  was  the 
predecessor  of  the  world-famous  "Gas  Light  and  Coke  Company," 
of  London,  the  largest  gas  company  of  the  world,  the  business  of 
which,  owing  to  the  constantly  increasing  demand  for  gas,  reached 
in  1916  the  following  stupendous  figures : 

Coal  and  cannel  carbonized,  1,791,166  tons;  gas  made,  29,247,- 
656,000  cubic  feet;  coke  produced,  1,103,444  tons;  receipts  from 
gas,  coke,  and  other  residuals  in  1916,  $29,166,975.57.  The  sales  in 
London  and  its  suburbs  of  the  three  London  companies,  the  "Gas 
Light,"  the  "Commercial,"  and  the  "South  Metropolitan,"  for  gas 
and  its  products  in  1916  totaled  $46,988,523.28;  truly  a  marvelous 
growth  from  the  little  experiment  of  Murdock  a  century  and  a 
quarter  earlier,  and  exactly  a  century  from  the  time  when  gas 
first  began  to  be  in  general  use ! 

Improvements  in  Methods  and  Equipment. 

In  the  meantime,  the  best  chemists,  technical  engineers  and  in- 
ventors had  applied  themselves  to  improvements  in  methods  and 
apparatus,  resulting  in  a  constant  decrease  in  the  cost  of  production 
due  in  part  to  the  growing  increase  in  the  yield  of  gas  per  ton  of 
coal,  and  radical  changes  in  "carbonizing  ovens,"  etc. 


18 


Evolution  of  Gas  Burners. 

The  development  of  gas  burners  has  had  a  highly  important 
share  in  the  growth  of  the  industry.  When  gas  was  first  success- 
fully used  for  illumination  at  the  beginning  of  the  past  century, 
it  escaped  directly  into  the  open  air  through  the  well-known  "fish- 
tail" burner  which  had  an  opening  very  thin  as  compared  with  its 
length.  This  with  minor  improvements,  continued  to  be  used  in 
substantially  the  same  manner  for  three  quarters  of  a  century, 
until  the  "Argand"  burner  was  invented  which  greatly  increased 
lighting  efficiency. 

This  also  in  turn  was  superseded  by  a  still  more  valuable  inven- 
tion about  twenty-five  years  later  which  increased  the  illuminating 
power,  technically  known  as  "candle  power,"  about  ten  fold  as 
compared  with  the  original  fish-tail  type.  This  new  invention,  the 
"Welsbach"  burner,  which  came  into  use  between  1890  and  1900 
was  revolutionary  in  its  character,  as  illumination  was  now  effected 
by  enveloping  the  flame  in  a  mantle  of  such  composition  that  upon 
being  heated  it  became  highly  luminous,  and  though  the  flame  itself 
was  no  longer  visible,  its  lighting  efficiency  was  vastly  increased. 

"Candle  Power"  and  Heat  Value. 

The  value  of  gas  now  became  largely  dependent,  not  upon  its 
"candle  power"  as  formerly,  but  upon  its  "calorific"  or  heating 
power,  which  was  further  increased  by  a  skillful  arrangement  of 
the  burner  inside  the  mantle  which  permitted  the  atmospheric  air 
to  be  mixed  with  the  gas  in  whatever  proportion  was  necessary  to 
produce  the  hottest  flame.  This  calorific  or  "thermal"  power  is 
measured  in  "British  Thermal  Units,"  usually  designated  by  "B. 
T.  U."  Hence,  in  intelligent  modern  practice,  the  interests  of  con- 
sumers are  best  conserved  by  requiring  an  adequate  measurement 
in  B.  T.  U.'s  for  all  purposes,  without  regard  to  "candle  power/' 
which  is  more  expensive  and  less  valuable. 

Advent  of  the  Gas  Engine. 

The  discovery  of  gas  and  its  successful  application  in  lighting 
and  heating  resulted  in  the  later  wonderful  invention  of  the  "internal 
combustion  engine,"  which  has  for  many  purposes  replaced  steam 
engines  and  made  possible  the  universal  use  of  automobiles.  It  is 
interesting  to  note  that  in  the  year  1794  a  patent  was  issued  in 
London,  suggesting  the  principle  of  internal  gas  explosion,  which 
was  followed  by  various  experiments  and  patents  until  in  the  year 
1860  E.  Lenoir,  a  Frenchman,  perfected  the  first  gas  engine  that 
was  brought  into  successful  use.  The  complete  mastery  of  the 
problem,  however,  was  effected  by  Dr.  Otto  in  1876,  who,  over- 
coming all  obstacles,  produced  an  engine  which  quickly  spread  into 


19 

wide  commercial  use,  thus  paving  the  way  for  the  modern  gasoline 
motor. 

Gas  Applied  to  Motor  Vehicles,  and  a  Return  to  Primitive  Methods. 

This  agency  which  has  supplied  the  power  for  over  a  million 
automobiles  and  motor-buses  for  service  in  the  world  of  business 
and  pleasure,  is  in  some  places  now  replaced  by  power  of  a  more 
primitive  nature.  Since  the  war  has  caused  a  scarcity  of  gasoline 
for  industrial  purposes  in  Europe,  many  omnibuses  in  London  are 
now  being  operated  by  means  of  coal  gas  contained  in  portable  bags 
and  connected  with  the  motors  by  means  of  small  rubber  pipes. 
Thus  the  ancient  experiment  shown  by  Dr.  Clayton  about  1691, 
when  gas  was  collected  in  a  bladder,  has  been  resumed  in  actual 
practice,  and  the  first  cycle  of  discovery,  development  and  return 
has  been  completed  in  a  period  of  228  years. 

Boon  to  Civilization. 

Mr.  William  Newbigging  of  Manchester,  England,  recognized 
as  the  world's  greatest  authority  on  municipal  gas,  and  whose  death 
in  1916  was  a  deep  loss  to  the  world,  in  summing  up  the  importance 
of  the  gas  industry  said  (in  his  "Handbook  for  Gas  Engineers  and 
Managers,"  8th  edition,  London,  1913)  : 

"It  is  not  too  strong  an  assertion  to  make,  that  gas  lighting 
during  the  century  of  its  existence,  has  proved  one  of  the  greatest 
boons  enjoyed  by  civilized  humanity,  and  no  industry  that  can  be 
named  has  had  a  steadier  or  more  abundant  success." 

This  historic  outline  thus  far  devoted  to  coal  gas  because  of  its 
greater  interest,  would  be  incomplete  if  no  allusion  were  made  to 
two  other  modern  competitors,  "carburetted  water  gas"  and  "nat- 
ural gas."  The  former  is  largely  replacing  coal  gas  in  many  cities, 
while  natural  gas  is  largely  used  in  the  petroleum  districts. 

"Water  Gas." 

"Carburetted  water  gas"  is  produced  by  allowing  superheated 
steam  to  pass  through  a  mass  of  incandescent  coke  where  it  is  de- 
composed, and  a  new  combination  of  gases  is  effected  called  "blue 
gas,"  which  is  non-luminous.  This  is  afterwards  "enriched"  and 
made  luminous  by  absorbing  "gas  oil"  (a  byproduct  of  petroleum). 
In  some  cities  the  carburetted  water  gas  plants  are  used  only  in 
emergencies  when  the  regular  coal  gas  plants  are  unable  to  meet 
the  demands,  while  in  some  other  cities  the  entire  supply  of  gas 
is  of  this  kind ;  in  still  other  cities  the  gas  supplied  is  a  mixture  of 
both. 


20 


Natural  Gas. 

Natural  gas  was  first  found  in  commercial  quantities  and  made 
available  for  practical  use  soon  after  the  discovery  and  exploitation 
of  petroleum.  Since  its  production  is  largely  limited  to  the  areas 
where  petroleum  exists,  its  use  is  chiefly  confined  to  those  cities 
lying  sufficiently  near  to  permit  the  construction  of  pipe  lines  for 
its  economic  transportation.  The  chief  use  of  natural  gas  has  thus 
far  been  in  smelting  works  and  factories  of  near-by  cities;  and 
since  practically  its  entire  cost  is  in  the  drilling  of  wells  and  laying 
of  pipe  lines,  it  is  the  cheapest  of  all  fuels,  coal  included,  and  was 
formerly  sold  on  such  a  basis.  Being,  however,  controlled  largely 
by  the  Standard  Oil  Company,  whose  interest  controls  also  directly 
or  indirectly  the  affairs  of  most  of  the  gas  plants  in  the  cities  of 
the  United  States,  as  well  as  the  coal,  oil,  and  the  railways  which 
transport  them,  the  price  of  natural  gas  has  risen  as  rapidly  as 
franchises  and  contracts  permitting  such  advances  could  be  secured 
by  the  corporations  which  control  the  combined  monopolies. 


CHAPTER  III. 
PRESENT  GROWTH  AND  SCOPE  OF  THE  GAS  INDUSTRY. 

A  general  view  of  the  growth  of  the  gas  industry  in  the  United 
States  during  the  last  twenty-five  years  is  found  in  a  bulletin  issued 
by  the  Department  of  Commerce,  Bureau  of  the  Census,  entitled: 
"The  Manufacture  of  Gas,"  printed  by  the  Government  during 
1917.  The  following  data  are  extracts  or  summaries  from  this 
official  report. 

The  value  of  products  of  the  industry  in  1914  was  nearly  four 
times  as  great  as  in  1889,  the  period  covered  being  a  quarter  of  a 
century,  and  the  number  of  wage  earners  employed  in  1914  being 
approximately  three  and  a  half  times  the  number  employed  in  1889. 

The  census  of  1914  covered  1,284  establishments,  in  which 
43,792  wage  earners  were  employed,  with  gas  valued  at  $220,- 
237,790.  This  value  represents  that  of  the  product  delivered  to 
the  consumer,  and  in  25  years  it  had  increased  at  the  rate  of  286 
per  cent,  while  the  quantity  of  gas  in  1914  was  458  per  cent  greater 
than  the  output  in  1889. 

The  industry  is  well  established  throughout  the  United  States, 
some  establishments  being  reported  for  every  state.  New  York  is 
the  most  important  state  in  the  manufacture  of  gas;  in  1914  it  re- 
ported 24  per  cent  of  the  total  value  of  products  and  23  per  cent 
of  the  wage  earners.  Illinois,  which  ranked  second,  reported  12.8 
per  cent  of  the  total  value  of  products  and  8.9  per  cent  of  the  wage 
earners.  The  five  other  leading  states  in  order  were  Pennsylvania, 
Massachusetts,  New  Jersey,  California  and  Michigan. 

The  Standard  Oil  Company  which  controls  the  gas  companies 
of  many  cities  has  recently  advanced  the  price  of  "gas  oil,"  (a  by- 
product of  petroleum,  used  to  "enrich"  water  gas)  which  formerly 
sold  below  4  cents  per  gallon,  to  13.3  cents  in  1914  and  to  over  40 
cents  in  /p/7,  exceeding  ten  times  the  original  price,  thus  increasing 
the  profits  of  the  company  immensely,  and  furnishing  also  a  pretext 
for  advancing  rates  for  gas.  Here  is  an  added  reason  for  the 
public  ownership  of  coal,  oil,  and  other  natural  resources. 

These  figures  show  clearly  the  injustice  both  to  wage  earners  and 
the  public,  as  it  is  seen  that  each  wage  earner  produces  per  annum 
gas  which  is  sold  to  the  public  for  $5,026.90,  which  added  to  the  by- 
products mentioned  below,  increase  this  amount  to  about  $7,400, 
for  which  the  wage  earner  averaged  about  $600.  It  is  shown  later 
on  by  the  companies  own  official  statements  that  wages  paid  were 
but  one  twenty-fourth  of  the  amount  claimed  as  "costs." 


22 


Municipally  Owned  Establishments. 

Municipal  establishments  are  most  numerous  in  the  West  North 
Central  division,  where  in  1914  they  constituted  28.8  per  cent  of  all 
establishments.  The  statistics  show  an  increase  of  16  per  cent  in 
number  of  establishments  and  19.4  per  cent  in  value  of  products 
for  the  five-year  period. 

The  gas  works  of  Philadelphia,  although  owned  by  the  city,  are 
operated  by  a  private  corporation  and  are  not  here  included.*  The 
two  establishments  with  products  exceeding  $100,000  are  the  gas 
works  of  Richmond,  Va.,  and  Holyoke,  Mass.  Included  in  the 
"$20,000  to  $100,000"  group,  1914,  are  five  with  products  in  excess 
of  $50,000— those  of  Norwich,  Conn.,  Westfield,  and  Wakefield, 
Mass.,  and  Danville  and  Alexandria,  Va.  These  seven  establish- 
ments had  products  valued  at  $1,199,886  and  the  remaining  131 
establishments  had  products  valued  at  $557,131. 

Features  of  Government  Report  Purposely  Lacking — Injustice  to  Labor. 

The  above  brief  summary  of  the  Government  report  is  neces- 
sarily incomplete,  since  the  extracts  as  given  are  intended  to  give 
general  ideas  only  of  the  scope  of  the  industry.  Items  of  grave 
importance  are  intentionally  omitted  in  the  official  report.  We 
quote  verbatim:  "The  census  figures  for  expenses  do  not  purport 
to  represent  the  total  cost  of  manufacture,  since  they  take  no  ac- 
count of  depreciation  and  miscellaneous  expenses.  Consequently 
they  cannot  be  used  for  determining  profits.  Facts  of  interest  can 
be  brought  out,  however,  concerning  the  relative  importance  of  the 
different  classes  of  expenses  reported." 

This  policy  of  suppressing  information  at  the  dictates  of  the 
gas  monopoly  is  in  striking  contrast  to  that  followed  in  England  and 
Scotland  where  municipal  ownership  has  so  long  prevailed  and 
where  the  public  demand  and  get  itemized  accounts  of  all  expenses 
of  manufacture  and  operation  under  both  public  and  private  owner- 
ship ;  and  it  is  therefore  possible  there  to  ascertain  what  profits  are 
being  made  by  any  gas  undertaking,  public  or  private.  Such  re- 
ports as  tabulated  from  official  records  will  be  alluded  to  in  detail 
when  discussing  cost  of  operating  in  Europe. 


The  Situation  Since  1914. 

The  Bureau  of  Mineral  Resources  of  the  United  States  Geolog- 
ical Survey  (1917)  reports  the  amount  of  artificial  gas  (oil  gas, 
water  gas,  and  coal  gas  from  retorts  and  from  by-product  coke 
ovens)  marketed  and  sold  in  1915  as  266,204,245,000  cubic  feet 
valued  at  $173,832,132. 

•Philadelphia  is  still  under  the  control  of  the  "Philadelphia  Gas  Ring"  which  is  the 
subject  of  the  famous  chapter  under  that  title  in  the  first  edition  of  "Bryce's  American 
Commonwealth,"  which  chapter  the  "interests"  got  excluded  in  the  later  edition. 


23 

Coke  to  the  value  of  $105,503,868  for  41,581,150  short  tons  was 
made  in  1915,  on  which  a  gain  was  made  of  31  per  cent  in  quantity 
and  62  per  cent  in  value  in  1916. 

Tar  produced  in  1915  amounted  to  276,745,885  gallons,  of  which 
14  per  cent  was  used  for  fuel  and  86  per  cent  was  sold  at  an  average 
price  of  2.8  cents  a  gallon. 

Ammonium  sulphate  or  its  equivalent  produced  from  coal  gas 
plants  in  1915  was  52,311  tons  of  2,000  pounds,  of  which  51,921 
tons  was  sold  at  a  value  at  the  works  of  $1,329,651.  The  marketed 
production  of  ammonium  sulphate  from  by-product  coke-oven  plants 
was  197,128  tons,  valued  at  $9,867,475,  and  the  total  for  the  United 
States  was  249,049  tons,  valued  at  $11,197,126. 

Growth  of  Municipal  Ownership  of  Gas  Plants  in  the  United  States. 

The  first  municipal  gas  works  in  America  antedate  the  Civil 
War.  In  1852  the  city  of  Richmond,  Virginia,  constructed  municipal 
gas  works  which  rank  as  the  largest  and  oldest  not  only  in  the 
United  States  but  in  all  North  America.  A  year  later  Alexandria, 
Virginia,  took  the  same  progressive  step.  Two  other  Virginia  cities, 
Danville  and  Charlottesville,  acquired  municipal  gas  works  in  1876, 
and  Fredericksburg  in  1893.  The  plant  at  Henderson,  Kentucky, 
dates  from  1866.  Duluth,  Minnesota,  which  has  made  a  most 
striking  success  of  its  municipal  gas  works,  obtained  possession  in 
1898.  Holyoke,  Massachusetts,  began  to  operate  its  gas  and  electric 
light  plants  in  December,  1902.  Other  cities  have  followed  their 
lead,  but  the  growth  in  general  has  been  slow  as  compared  with 
the  rapid  stride  made  by  the  private  plants,  the  reason  being  that 
the  public  has  been  too  lethargic  to  realize  the  importance  of  owning 
and  operating  its  gas  plants  while  profiteers  have  eagerly  grasped 
the  opportunity  to  secure  long  term  franchises  at  rates  unjust  to 
the  public. 

In  1899,  out  of  a  total  of  965  gas  plants  in  the  United  States, 
14  (1.5  per  cent)  were  municipally  owned  and  operated.  In  1916, 
there  were  2,359  plants  of  which  126  (5.34  per  cent)  were  socialized. 
The  total  number  of  gas  plants  more  than  doubled  during  this  period 
of  seventeen  years  at  the  end  of  which  time  there  were  eight  times 
as  many  municipal  plants  as  there  were  in  1899. 


24 

The  Extent  and  Growth  of  the  Gas  Industry  in  America. 

(Brown's    Directory    of    American    Gas    Companies — 1917) 

Summary. 

Total  number  in  United  States  and  Canada 2,359 

Municipal    126 

Private 2,233 

Municipal      Private 
Plants          Plants 

Artificial   Gas 49  1,130 

Natural   Gas 10  758 

Acetylene  Town  Plants 26  108 

Gasoline  Town  Plants 41  29 

Parent    Companies 161 

Public   Service   Commissions..  47 


Total 126  2,233 

Municipal  Gas  Plants  by  City  and  State.     Artificial  Gas  Plants. 

I.   UNITED  STATES. 

Population  District  Supplied 

Alabama 

Eufaula    4,259  4,000 

Talladega   5,854  3,500 

California 

Gilroy  (Leased  to  private  company)       2,437 

Newport    Beach    (Gas    supplied   by 

private    company) 1,500 

Santa  Clara 4,348  6,000  (est.) 

Connecticut 

Norwich    20,367  30,000 

Florida 

St.  Petersburg 4,127       Normal,    8,500 

Winter,  20,000-25,000 

Tallahassee     5,018  7,000 

Georgia 

Albany    8,190  (1910) 

12,500  (est.  now) 

Cartersville 5,500  2,000 

Dalton    5,324  3,000 

La   Grange 5,587  8,250 

Iowa 

Dexter    800  600 

Newton  4,616  5,000 

Kentucky 

Henderson  11,452  8,000 

Louisiana 

Alexandria  (to  be  constructed) 

Massachusetts 

Holyoke    57,730                     65,000 

Middleboro    8,214                        4,000 

Wakefield   13,000                      10,000 

Westfield    18,600  (est.  1917) 


25 

^scanaba  15,000  (est.  now)   10,000 

Ypsilanti   6,230  9,000 

Minnesota 

Adams   (to  be  superseded  by 

electricity)    576 

Duluth   78,466  70,000 

Jasper    , 804 

Renville  1,182  1,239 

Slayton  (discontinued) 

Virginia  10,473  12,000 

West  Minneapolis   3,520  4,000 

Nebraska 

Albion    1,584  1,300 

New  Jersey 

Paulsboro    2,121  4,000 

New  York 

U.  S.  Military  Academy  (controlled 

by  U.  S.  Govt 2,550 

North  Carolina 

Rocky    Mount 8,054  8,054 

Wilson  6,715  6,000 

Ohio 

Bellefontaine   8,239  5,000 

Lebanon    2,698  2,000 

Ripley 1,840  1,840 

Pennsylvania 

Philahelphia     (Leased    for    private 

operation)     . . .' 1,722,000  

South  Dakota 

Dell  Rapids 1,367  1,700 

Virginia 

Alexandria 15,329  21,000 

Charlottesville   6,765  12,000 

Danville  22,000  (1917)          15,000 

Fredericksville    6,138  6,200 

Richmond   158,700  134,700 

West  Virginia 

Wheeling   (Discontinued  operations 

March  31,  1916). 
II.   DOMINION  OF  CANADA 

British  Columbia 

Nelson   7,000  2,500 

Ontario 

Belleville     12,000  900 

Brockville   10,000 

Deseronto   2,000 

Guelph   17,000  17,000 

Kingston   20,000 

Kitchener    19,382 

Owen  Sound 12,566 

St.  Catherine 18,000  18,000 

St.  Thomas 18,000  18,000 

Waterloo  5,016  5,016 

Quebec 

Sherbrooke     20,000 

Sorel    9,000 

Several  other  plants  have  come  under  municipal  ownership  since 
the  above  data  were  collected. 


CHAPTER   IV. 
HOW  GAS  IS  MADE. 

A  Brief  Summary. 

The  general  processes  used  in  the  production  of  gas  are  rela- 
tively simple,  and  the  industry  requires  no  more  skill  nor  training 
than  is  required  in  the  successful  operation  of  the  majority  of 
business  enterprises. 

Coal  gas  and  carburetted  water  gas  are  the  most  important  gases 
artificially  made  and  these  are  most  widely  used  either  alone  or  in 
combination.  The  processes  which  produce  these  gases  vary,  but 
the  general  principles  governing  the  production  of  each  conform 
to  established  rules. 

'•Carbonizing"  of  Coal  Gas. 

The  destructive  distillization  or  "carbonizing"  of  coal  in  "re- 
torts" or  "ovens"  produces  coal  gas,  but  since  coal  varies  widely  in 
its  composition,  bituminous  coal  is  utilized  to  the  greatest  advantage 
as  it  is  most  productive  of  hydrogen. 

The  yield  and  the  quality  of  the  gas  and  of  the  by-products 
produced  depend  upon  varying  conditions  and  are  controlled  to  a 
large  extent  by  the  temperature  existing  in  the  retorts,  by  the  size 
of  the  charge  of  coal  used,  by  its  distribution  in  the  retorts,  by  the 
length  of  time  the  distillation  has  been  going  on,  and  by  the  affinity 
of  other  factors  of  a  more  or  less  complex  nature.  In  spite  of 
these  variations,  however,  the  products  in  their  main  characteristics 
will  remain  the  same.  Among  the  solids  are  coke  and  retort  car- 
bon ;  the  liquids  consist  largely  of  tar  and  ammoniacal  liquor ;  while 
the  gas  produced  requires  purification.  The  approximate  average 
yield  per  ton  of  coal  of  the  various  grades  used  is  between  10,000 
and  11,000  cubic  feet  of  gas  and  between  1,200  and  1,300  pounds  of 
coke. 

Carburetted  Water  Gas. 

"A  carburetted  water  gas  plant  is  a  useful  adjunct  to  the  ordi- 
nary coal  gas  plant  of  a  gas-works.  The  plant  is  used  both  for  gas 
making  and  for  gas  enriching.  The  gas  is  made  by  admitting  super- 
heated steam  at  100  to  120  pounds  pressure  through  the  bed  of  in- 
candescent coke  in  the  generator,  where  it  is  decomposed  into  its 
constituent  gases,  oxygen  and  hydrogen.  The  resultant  oxygen 
combines  with  the  carbon  of  the  coke,  forming  carbon  dioxide, 
which,  rising  through  the  higher  layers  of  the  incandescent  coke, 


27 

is  reduced  to  carbon  monoxide,  and  this  mixing  with  the  hydrogen 
constitutes  what  is  known  as  "blue"  gas.  This  is  non-luminous, 
and  is  afterwards  enriched  with  oil  in  the  carburettor,  which  im- 
parts to  the  gas  its  light-giving  properties."  l 

Relation  of  Candle  Power  and  British  Thermal  Units  to  the  Quality 
and  Usefulness  of  Gas. 

We  speak  of  gas  as  having  a  certain  "candle  power."  "The 
standard  candle  is  a  sperm  candle,  six  of  which  weigh  one  pound, 
and  each  burns  120  grains  of  sperm  per  hour."  2  "In  England, 
Wales,  and  Ireland,  the  gas  actually  supplied  to  consumers  varies 
in  illuminating  power  from  14  to  22  standard  candles,  according  to 
the  quality  of  coal  used.  In  Scotland,  the  range  of  illuminating 
value  is  from  12  to  32  candles."  3  In  America,  there  is  no  uniform 
standard  required,  each  city  or  state,  as  the  case  may  be,  deter- 
mining what  candle  power  shall  be  furnished.  A  law  enacted, 
June  27,  1907,  in  the  State  of  New  York  may  serve  as  an  illustra- 
tion. It  states:  "The  maximum  illuminating  power  required  and 
minimum  illuminating  power  permitted  of  gas  so  furnished  or  sup- 
plied in  any  such  city  shall  be  as  follows:  if  a  coal  gas,  sixteen 
candles;  if  a  mixed  coal  and  water  gas,  eighteen  candles;  if  a  car- 
buretted  water  gas,  twenty  candles."  4 

"The  British  standard  unit  of  heat  (British  Thermal  Unit,  des- 
ignated by  B.  T.  U.)  is  the  amount  of  heat  required  to  raise  the 
temperature  of  one  pound  avoirdupois  of  water  one  degree  Fahren- 
heit." 5  The  calorific  power  of  gas  supplied  in  Great  Britain  ranges 
from  about  492  B.  T.  U.  to  580  B.  T.  U.  In  America,  the  number 
of  heat  units  required  is  generally  higher.  The  average  is  about 
600  B.  T.  U.,  though  the  range  varies  from  about  550  to  825  B.  T.  U. 

The  relation  of  candle  power  and  heat  value  of  gas  to  its  use- 
fulness for  fuel  and  also  for  lighting  purposes  was  thoroughly  in- 
vestigated by  the  Bureau  of  Standards  on  behalf  of  the  City  of 
Chicago  in  the  recent  controversy  between  the  city  and  the  People's 
Gas  Light  and  Coke  Company.  The  law  in  force  required  the  gas 
company  to  furnish  gas  of  not  less  than  22  candle-power  and  of  a 
total  heating  value  of  not  less  than  600  British  Thermal  Units 
(B.  T.  U.)  per  cubic  foot.  The  gas  company  proposed  that  these 
two  requirements  be  repealed  and  that  a  single  requirement  of  565 
B.  T.  U.  per  cubic  foot  be  fixed  as  the  monthly  average  total  heating 
value. 

1.  "Handbook   for  Gas  Engineers   and   Managers." — Newbigging,   pp.    99-100. 

2.  Newbigging,  page  381. 

3.  Newbigging,  page  470. 

4.  "Rules  and  Regulations  Governing  Inspection  of  Gas." — State  of  New  York  Public 
Service  Commission,  Second  District.     Page  14. 

5.  Newbigging,  page  464. 


28 

In  order  to  meet  the  candle  power  requirement,  the  gas  company 
had  been  compelled  to  furnish  a  heating  value  of  approximately 
665  to  670  B.  T.  U.  per  cubic  foot  which  cost  the  company  more 
than  it  would  have  done  if  it  had  furnished  gas  of  600  B.  T.  U. 
value  which  it  could  not  do  and  meet  the  candle-power  requirement. 
The  increased  cost  was  largely  due  to  the  increased  price  of  oil 
used  in  the  production  of  water  gas  employed  in  maintaining  the 
heat  standard. 

This  phase  of  the  gas  question  is  of  interest  at  the  present  time 
since  the  gas  companies  of  the  country  are  practically  all  interested 
in  getting  a  lower  B.  T.  U.  standard  for  gas.  "This  is  due  to  the 
increased  price  of  benzol  for  war  demands,  to  the  discovery  of  a 
method  of  extracting  benzol  from  water  gas,  to  the  increased  price 
of  oil  used  in  the  production  of  water  gas  and  to  the  possibilities 
of  using  a  cheaper  coal  gas  or  a  coal  that  will  give  a  leaner  gas 
and  better  coke.  Many  of  these  companies  have  openly  insisted 
that  the  "leaner"  gas  was  just  as  valuable  to  the  consumer  as  the 
richer,  and  have  seldom  suggested  any  reduction  of  rates  (and 
never  a  proportionate  reduction  of  rates)  for  the  lowering  of  the 
B.  T.  U.  standard.  This  report  of  the  Bureau  of  Standards  here 
summarized  by  Dr.  Clyde  L.  King  clearly  shows  that  the  price  of 
gas  should  be  reduced  proportionately  with  the  B.  T.  U.  standards. 
The  findings  of  the  Bureau  after  exhaustive  research  run  counter 
to  the  opinion  publicly  advanced  by  company  managers  and  en- 
gineers that  so-called  "leaner"  gas  (lower  B.  T.  U.  or  lower  candle 
power)  will  be  approximately  as  useful  per  cubic  foot  as  the  richer 
or  higher  B.  T.  U.  gases."  e 

Products  from  a  Ton  of  Coal. 

The  average  percentage  yield,  by  weight,  of  good  bituminous 
coal  is  as  follows : 7 

Gas    22% 

Coke  and  breeze 64% 

Tar 5% 

Ammoniacal  liquor 9% 

100% 

Each  degree  of  temperature  in  the  distillation  of  coal  has  its 
own  products  of  decomposition,  and  each  rise  in  temperature  pro- 
duces a  further  breaking  up  and  re-arrangement  of  the  compounds 
which  previously  existed.  The  usual  temperature  attained  in  actual 
practice  is  from  1800°  to  2000°  Fahr.  at  which  temperature  there 
is  a  maximum  yield  of  benzene,  toluene,  phenol,  etc.,  in  the  tar,  with 

6.  "The   Utilities  Magazine,"  July,   1917. 

7.  Newbigging. 


29 

a  maximum  illuminating  power  in  the  gas.  Should  the  temperature 
be  beyond  this,  there  will  be  a  larger  production  of  gas,  at  the  ex- 
pense of  the  light-giving  constituents.8 

"A  good  average  yield  in  gallons  per  ton  of  coal  carbonized 
should  be:  Tar,  7  gallons;  benzol,  1.5  gallons;  and  toluol,  0.35  gal- 
lons/' 9 

The  relative  value  of  different  grades  of  bituminous  coal  de- 
pends upon  its  light  and  heat-giving  qualities  and  the  several  re- 
sidual products.  Two  qualities  of  coal  may  be  compared  as  fol- 
lows:10 

No.  i,  yielding — 

10,600  cubic  feet  gas  per  ton  (17^  candles'  value  =  636  pounds 
sperm). 

13^2  hundredweight  coke. 

10  gallons  tar. 

22  gallons  ammoniacal  liquor. 

No.  2,    yielding — 

9,700  cubic  feet  gas  per  ton  (16)4  candles'  value  =  557  pounds 
sperm). 

14  hundredweight  coke. 

9  gallons  tar. 

20  gallons  ammoniacal  liquor. 

8.  Newbigging. 

9.  Extract  from  "The  Conveyor"  in  "The  Gas  Age,"  July  16,  1917. 
10.    Newbigging. 


CHAPTER  V. 

"FINANCING"  A  TON  OF  COAL  AND  PROFITS  ON  GAS. 

"We  must  choose  then,  between  a  monopoly  managed  by  the  public  in  the 
interests  of  the  public,  and  a  monopoly  in  the  hands  of  private  parties  who, 
to  judge  from  all  experience,  will  fleece  the  public  to  the  utmost  extent.  .  .  . 
It  would  appear  almost  as  a  matter  of  course  that,  if  it  is  necessary  to  or- 
ganize a  monopoly  in  order  to  secure  the  interests  of  the  public,  this  monopoly 
should  be  within  the  control  and  management  of  the  public.  Public  owner- 
ship is,  therefore,  the  natural  system  in  all  cases  of  necessary  monopolies." 
— Dr.  Edmund  J.  James,  President  of  the  University  of  Illinois,  ito  "The  Re- 
lation of  the  Modern  Municipality  to  the  Gas  Supply" 

Gas  Companies  make  their  profits  by  "subtracting  the  greater 
from  the  less  and  getting  more."  It  will  surprise  many  consumers 
to  learn  that  a  gas  company  receives  much  more  for  the  by-products 
or  "residuals"  left  from  a  ton  of  coal  after  the  gas  has  been  ex- 
tracted than  it  pays  for  the  coal  in  the  first  place  with  the  gas  in- 
cluded. It  will  be  still  more  surprising  to  learn  that  for  a  single 
residual,  "coke,"  consumers  in  America  are  charged  a  sum  greater 
than  the  cost  of  the  coal  which  produced  it  when  it  contained  all  its 
original  constituents.  This  nets  a  profit  in  addition  to  that  received 
from  other  residuals,  including  coal  tar,  ammonia,  etc.,  to  say  noth- 
ing of  the  clear  profit  on  the  gas  manufactured.  The  gas  alone  has 
been  bringing  over  four  times  the  cost  of  the  coal. 

From  a  ton  of  coal  which  cost  about  $3.00  per  ton  delivered  at 
the  gas  works  in  cities  of  the  United  States  prior  to  1915,  the  fol- 
lowing products  were  obtained,  approximately : 

1282  cu.  ft.  £as  ©  $0.905  per  1,000  cu.  ft $11.53 

1286  Ibs.  coke  @  $5.85  per  ton 3.76 

12  gals,  tar '^-tfS£F 75 

30  gals,  ammoniacal  liquor  <2|Jj|S§^t.)  per  gallon 75 


Total  receipts  from  a  ton  of  coal $16.79 

The  prices  and  quantities  given  are  the  average  ones  reported 
from  those  cities  where  data  were  available.  Some  companies 
bought  their  coal  at  from  $2.50  to  $2.70  per  ton  delivered.  The 
above  figures  are  on  the  basis  of  a  "gross"  ton  of  coal,  (20  cwt.  or 
2240  Ibs.)  which  is  the  ton  that  has  been  largely  used  by  gas  com- 
panies. But  to  cover  all  contingencies,  and  reducing  the  ton  to 
2,000  pounds,  the  standard  used  in  weighing  most  other  commod- 
ities, the  receipts  from  a  ton  of  coal  would  be  as  follows : 

Gas  $10.28 

Coke 3.35 

Tar  and  ammoniacal  liquor  (estimated) 1.50 

Estimated  receipts  from  a  ton  of  coal $15.13 


31 

Thus  it  will  be  seen  that  under  the  normal  conditions  preceding 
the  war,  the  gas  companies  received  for  two-thirds  of  a  ton  of 
coke  approximately  from  10  to  25  per  cent  more  than  the  cost  of 
the  entire  original  ton  of  coal.  The  gas  and  hy-products  together 
brought  approximately  five  times  the  cost  of  the  coal. 

Owing  to  the  Unjust  Advance  in  Prices  for  Their  Coke,  Greater  than  Increase 

in  Cost  of  Their  Coal,  Gas  Companies  Receive  Greater  Profits  on 

Gas,  Without  Raising  its  Price. 

Since  1915  the  increased  price  of  coal  has  been  used  by  the 
companies  as  an  excuse  for  raising  the  price  of  gas,  but  this  is  de- 
ceptive and  unjust  as  they  have  raised  the  price  of  coke  to  such  an 
extent  (in  some  cases  to  $9  or  $10  per  ton  or  more)  that  their  actual 
profits  are  now  greater  than  ever,  even  at  the  old  prices  for  gas, 
especially  when  the  higher  prices  which  they  get  for  other  by- 
products are  considered! 

Since  the  war  also  the  gas  companies  have  used  the  increased 
cost  of  coal  as  an  argument  for  decreasing  the  quality  of  the  gas, 
thus  furnishing  a  poorer  grade  for  a  higher  price.  This  costs  the 
consumer  more  because  more  gas  must  be  used  for  both  lighting 
and  cooking.  This,  too,  seems  most  unjust  since  the  margin  of 
difference  between  the  cost  of  the  material  and  the  receipts  therefor 
in  commercial  form  nets  the  gas  companies  profits  greater  than 
that  of  normal  times  while  the  consumer,  as  usual,  pays  the  bill. 

Concealed  Profits  on  Gas. 
BY  E.  W.  BEMIS,  Ph.  D.  in  "Municipal  Monopolies" 

"Gas  companies  have  various  ways  of  concealing  their  profits, 
even  in  the  reports  they  are  forced  to  make  to  the  Massachusetts 
Gas  Commission.  Not  only  are  exorbitant  salaries,  legal  fees,  and 
"legislative"  or  "advertising"  expenses  often  paid,  but  directors 
sometimes  justify  their  titles  by  "directing"  the  money  of  their  cor- 
porations into  their  own  pockets  through  excessive  prices  for  oil, 
acetylene  patents,  or  other  properties  in  which  they  are  personally 
interested.  One  company  may  thus  buy  from  another  for  60  cents, 
or  even  a  dollar,  in  the  holder,  gas  which  it  can  itself  make  for  20 
to  30  cents. 

"Gas  can  be  sold  at  a  profit  on  the  structural  value  of  the  plants 
for  75  cents  per  thousand  feet  in  most  of  the  cities  of  over  200,000 
people  east  of  the  Rocky  Mountains.  In  such  cities  the  cost  of 
duplication  of  the  plants  would  rarely  exceed  $4.00  per  thousand 
feet  of  annual  output.  In  the  famous  Cleveland  Gas  Case  in  1892, 
the  officers  of  the  leading  gas  company  of  that  city  reported  the 
cost,  aside  from  depreciation  and  profit,  but  inclusive  of  taxes,  as 
38  cents  per  thousand  feet  at  the  burner.  Mr.  Baker,  chairman  of 


32 

the  Massachusetts  Gas  Commission,  testified  that  seven  cents  was 
ample  for  depreciation,  and  such  has  been  the  experience  in  the 
Richmond  (Va.)  works  the  past  ten  years.  This  would  mean  45 
cents  as  the  entire  cost  in  Cleveland  in  1890  and  1891,  aside  from 
profit.  Since  then  the  two  Cleveland  companies,  one  with  an  out- 
put of  only  161,000,000  feet  in  1893-94,  and  207,671,000  feet  in 
1896-97,  have  never  skipped  a  dividend  of  6  per  cent  or  more,  al- 
though allowed  to  charge  but  80  cents  per  thousand  feet,  and  com- 
pelled to  pay  back  6  per  cent  of  that,  or  5  cents,  to  the  city,  in 
addition  to  the  taxes. 

"In  this  Cleveland  case  the  evidence  seemed  to  warrant  the 
claim  of  the  city's  attorney,  General  Meyer,  that  without  any  cash 
payments  for  stock  save  the  original  $100,000  about  1850,  there  had 
been  such  an  issue  of  new  securities  without  the  passing  of  a  single 
dividend  on  any  of  them,  that  in  1892  an  original  investor  of  $1,000 
was  in  possession  of  $24,000  of  securities.  On  these  he  was  re- 
ceiving yearly  6  per  cent,  or  144  per  cent  on  his  only  cash  invest- 
ment. When  the  well-known  manufacturer  of  gas  meters  and  gas 
apparatus,  John  Mcllhenny  of  Philadelphia,  was  asked  in  court  his 
opinion  of  this,  he  gave  the  following  illuminating  answer: — 

"  'That  is  not  an  unusual  thing  in  this  growing  country  at  all. 
It  is  about  the  history  of  all  the  prosperous  gas-works;  and  it  is 
further  more  about  the  history,  as  you  have  explained  it,  of  all 
prosperous  manufacturing  concerns/ 

"The  truth  of  the  last  part  of  his  answer  will  be  seriously  ques- 
tioned by  some  business  men,  but  there  is  abundant  evidence  of  a 
large  measure  of  truth  in  the  reference  to  gas  companies.  In  an 
affidavit  in  a  gas  case  in  Chicago  it  was  asserted  that  only  $100,000 
had  ever  been  paid  in  in  cash  to  the  Chicago  Gas  Light  and  Coke 
Company,  whose  stock,  in  1887,  was  $4,984,000,  and  which  in  that 
year  issued  a  dividend  in  bonds  of  $7,650,000,  while  the  stockholders 
almost  doubled  their  stock  in  a  consolidation  of  companies  then 
effected.  Only  $750,000  in  cash  was  ever  paid  in  to  the  oldest  of 
the  New  York  companies ;  yet  this  company,  after  paying  dividends 
averaging  on  this  original  payment  40%  yearly  from  the  origin  of 
the  company,  had  increased  its  stock,  through  stock  dividends,  to 
$7,600,000  in  1884. 

"The  public  are  thus  prevented  from  realizing  the  profits  of  these 
companies  by  their  extensive  stock  and  even  bond  watering.  For 
example,  The  Mutual  Fuel  Gas  Company  of  Chicago,  above  re- 
ferred to,  was  bought  by  the  People's  Gas  Company  in  1898;  and  in 
lieu  of  its  $1,500,000  of  stock  representing  $2,119,667  of  tangible 
assets  the  purchasers  issued  $5,000,000  of  bonds,  making  the  capital- 
ization $9.00  per  thousand  feet  of  annual  output  in  all  of  the  Chi- 
cago companies;  and  on  this  basis  they  are  doing  so  well  with  gas 

(Above  is  extracted  from  "Municipal  Monopolies,"  pp.  588-593,  by  Edward  W.  Bemis, 
Ph.   D.     Copyrighted  1899.) 


33 

at  $1.00  that  all  their  securities,  representing  about  $20,000,000 
of  structural  value,  and  $40,000,000  of  free  gift  by  the  people,  are 
above  par." 

Cost  and  Profit. 

Two  questions  of  keen  interest  to  the  student  of  the  gas  problem 
are:  "What  does  it  cost  to  produce  and  deliver  gas?"  and  "What 
profit  does  a  gas  plant  make?" 

The  answers  to  these  two  questions  depend  to  a  large  extent 
upon  who  controls  the  plants,  the  amount  of  watered  stocks,  the 
methods  of  bookkeeping,  etc.  It  is  the  object  here  to  give  figures 
as  shown  by  the  company's  own  books,  and  to  refer  the  reader  to 
other  portions  of  this  work  which  discuss  phases  of  these  two  ques- 
tions. 

According  to  the  "Schedule  of  Manufacturing  Costs,"  published 
by  the  Boston  Consolidated  Gas  Company,  September,  1917,  this 
company  estimated  the  total  cost  (excluding  depreciation  and  re- 
serves) to  be  51.51  cents  per  1,000  cubic  feet  of  gas  sold. 

The  Gas  Record  in  its  issue  of  April  25,  1917,  gave  the  cost 
of  making  carburetted  water  gas  per  1,000  cubic  feet  as  24.2  cents 
in  1914  and  55.3  cents  in  1917,  this  being  the  net  cost  in  the  holder. 
The  same  authority  gave  the  cost  of  making  coal  gas  as  41.2  cents 
in  1914  and  56.4  cents  in  1917. 

The  reports  of  the  Boston  Consolidated  Gas  Company  and  of 
the  Gas  Record  follow  : 

Boston   Consolidated   Gas   Company  Files   Schedule  of   Manufacturing  Costs. 

In  accordance  with  the  requirement  of  State  law,  which  provides 
that  the  company  shall  annually  publish,  in  September,  a  report 
showing  the  cost  of  gas  in  the  holder,  wages,  distribution,  deprecia- 
tion and  maintenance,  the  Boston  Consolidated  Gas  Company  is- 
sued its  statement  on  September  28,  1917. 

This  showed  that  2,895  million  cu.  ft.  of  gas  were  purchased  and 
4,153  million  cu.  ft.  were  manufactured,  during  the  year  to  June 
30.  Of  this  total  of  7,053  million,  6,693  million  cu.  ft.  were  sold. 

Unit  costs  of  manufactured  gas  per  1,000  cu.  ft.  were,  as 
reported  by  the  Company: 

Wages  at  works  ....................................................  $0.0285 

Coal  and  coke,  in  gas  manufacturing  ..................................  0955 

Coal,  coke,  etc.,  in  making  steam  ....................................  0135 

Enriching  materials  ..................................................  1077 

Purifying   materials  ..................................................  0020 

Water   ..............................................................  0014 

Stable  and  laboratory  wages  and  other  expenses  at  works  ............  0084 


Total  operating  expense  .............................................  $0.2570 

Deduct   residuals   made  .  .  ...................................  0015 


34 

Net  operating  expense $0.2555 

Repairs  and  maintenance 0137 

Total  cost  in  holder $0.2692 

The  costs  of  purchased  gas  were : 

Average  purchase  price  per  1,000  cubic  feet $0.2828 

Purification  and  storage  expense 0112 

Total  cost  and  operating  expense $0.2940 

Maintenance  and  repairs  of  storage  and  purifying  plant 0020 

Total  cost  in  holder1 $0.2960 

The  average  cost  in  the  holder  of  all  manufactured  and  pur- 
chased gas  was  28.02  cents  per  thousand  feet,  and  of  all  gas  sold, 
29.09  cents. 

Distribution  costs  and  general  expenses  were:  for  distribution 
wages  and  expenses,  4.32  cents;  maintenance  and  repairs  of  distri- 
bution system,  3.47  cents;  general  expense  and  management,  7.07 
cents;  taxes  and  insurance,  7.56  cents;  total,  22.42  cents. 

The  cost  of  maintenance  and  repairs  for  1,000  cu.  ft.  sold  were: 

Per  1,000  cu.  ft. 

At  works $0.0084 

Of  services  and  mains 0198 

Of  meters 0091 

Of  distribution  works  and  holders 0058 

Of  storage  and  purifying  plant 0009 


Total   $0.0440 

The  total  costs  are  thus  summarized : 

Cost  of  manufactured  and  purchased  gas,  per  1,000  cu.  ft.  sold $0.2909 

Cost  of  distribution  and  general  expenses 2242 

Total  cost  (excluding  depreciation  and  reserves) $0.5151 

—"American  Gas  Engineering  Journal/'  Oct.  6,  1917. 


1.    It  must  be  understood  that  this  company  is  financed  in  the  usual  way  with  watered 
unties,  and  that  the  cost  under  municipal  ownership  would  have  been  much  less. 


35 

How  Rockefeller  and  the  Standard  Oil  Monopolies  which  Control  both  Oil  and 

Gas,   Advanced  the   Price   of   "Gas    Oil,"     (a    byproduct    of     Petroleum 

Formerly  Selling  at  about  4c  per  gallon),  to  14c  in  1914,  and  to  over 

40c  in  1917,  so  as  to  Make  the  Apparent  Cost  of  "Water 

Gas"  Equal  to  that  Claimed  for  Coal  Gas.    The 

Increased  Profits  on  the  "Gas  Oil"  alone 

Exceed  Ten  Times  all  the  Wages 

Paid  in  Producing  Gas  I 

Cost  of  Making  Carburetted  Water  Gas,2  as  Claimed  by  the  Company. 

Cost  in  cents  per  1,000  cu.  ft. 
1914  1917 

Oil,  1.9  gallons  ...................................  13.3  38.9 

Coke,  60,000  cubic  feet  gas  per  ton  ...............  5.8  8.6 

Boiler  fuel  .......................................  1.0  2.0 

Wages   ..........................................  1.8  2.3 

Water    ..........................................  0.1  0.1 

Purifying   .......................................  0.1  0.2 

Repairs  and  maintenance  .........................  2.9  3.8 


Total 
Less  residuals  ....................................  0.8  0.6 

Net  cost  into  holders  .............................  24.2  55.3 

Increase  .....................................  31.1 

=  129% 

The  above  figures  taken  from  the  company's  own  books  show 
that  while  they  claim  an  increased  cost  from  1914  to  1917  of  31.  Ic, 
they  increased  wages  only  one-half  of  one  cent,  the  water  cost  no 
more  because  they  obtained  it  from  the  municipally  owned  water 
works,  while  the  Standard  Oil  interests  that  control  the  works, 
made  25.  3c  extra. 

Cost  of  Making  Coal  Gas,  as  Claimed  by  Company. 

Cost  in  cents  per  1,000  cu.  ft. 
1914  1917 

Coal,  12,000  cu.  ft.  per  ton  ........................  31.50  43.7 

Coal  handling  ....................................  0.6  0.7 

Coke  for  setting,  10%  ............................  2.9  4.3 

Repairs  and  maintenance  .........................  2.1  2.8 

Boiler  fuel  .......................................  0.3  0.6 

Wages   carbonizing  ...............................  2.1  2.7 

Electrical  power  .................................  0.1  0.1 

Purifying    .......................................   1.3  1.4 

Solvene   .........................................  0.4 

Paraffin   ...........................................  0.1 

Total    .......................................  41.2  56.4 

Less  residuals  ....................................  17.8  27.1 

Net  cost  into  holders  .........  '.  .............  ..23.4  29.3 

2.    The  Gas  Record,  April  25,   1917.  ncreaSC 


36 


The  Gas  Situation  in  Philadelphia, 
65  Cent  Gas  to  the  Consumer  a  Possibility  by  a  Fair  Deal. 

The  Gas  Works  of  Philadelphia  were  taken  possession  of  by  the 
city  in  1841,  but  they  have  never  been  really  and  completely  public. 
At  the  beginning  of  municipal  ownership,  a  Board  of  Trustees,  under 
the  rulings  of  the  Court,  became  the  agents  of  the  bondholders  and 
absolute  masters  of  the  situation  as  against  the  city  until  the  bonds 
should  be  paid.  Byrce  in  his  "American  Commonwealth"  cites  this 
as  one  of  the  most  corrupt  forms  of  private  ownership  in  history,  as 
the  Gas  Trust  practically  owned  the  city  government,  instead  of  the 
city's  owning  the  gas  works. 

In  1887  a  change  took  place  and  for  a  period  of  ten  checkered 
years,  in  spite  of  determined  effort  on  the  part  of  private  interests  to 
discredit  municipal  operation,  the  city  plant  paid  for  itself  out  of  its 
net  earnings,  and  furnished  cheaper  gas  during  nearly  all  of  its  his- 
tory than  the  private  plants  of  New  York,  Baltimore  and 
Washington.3 

"In  fact,  official  city  reports  show  that  during  the  period  of 
nearly  eleven  years  of  direct  city  operation,  1887-1897,  the  receipts 
from  the  gas  operations  exceeded  all  expenditures  (including  ap- 
proximately $2,500,000  for  extensions  and  betterments)  by  $4,945,- 
931.  In  other  words,  in  eleven  years  the  city  treasury  had  absorbed 
cash  profits  to  the  amount  of  nearly  $5,000,000,  which  would  have 
been  ample  to  rehabilitate  the  plant  in  1897.  This  record  is  opposed 
to  the  carefully  nourished  impression  spread  among  the  citizens  that 
the  old  gas  works  were  a  source  of  expense  to  the  taxpayers,  an  idea 
still  held  by  some  city  officials  supposedly  in  a  position  to  know  the 
facts."4  i  ?j>j 

In  1897  the  gas  plant  was  leased  for  thirty  years  to  the  United 
Gas  Improvement  Company.  This  lease  was  practically  a  private 
business  transaction  between  the  City  Council  and  the  Gas  Com- 
pany because  there  was  no  city  ordinance  by  which  the  people  could 
demand  that  the  question  of  leasing  the  works  be  submitted  to  popu- 
lar vote.  Prof.  Bemis  in  his  "Municipal  Monopolies"  (p.  606)  has 
shown  that  the  works  were  not  leased  for  the  financial  good  of  the 
city,  for  the  city  could  have  secured  lower  prices  than  are  provided 
by  the  lease.  Nor  were  the  works  leased  to  the  highest  bidder, 
thanks  to  the  corporate  interests  whose  golden  fleece  promised  well 
to  be  worth  not  less  than  40  or  50  million  dollars  in  years  to  come. 
As  the  time  approaches  for  the  termination  of  the  lease  in  1927, 
public  interest  is  being  aroused  to  insure  fair  play  for  the  city  and 
the  people  of  Philadelphia  in  the  matter  of  municipal  ownership 
and  operation.  It  is  our  belief  that  these  efforts  will  prove  success- 
ful for  the  world  has  sounded  the  knell  of  graft  and  despotism. 

3.  Parsons,   "The  City  for  the  People,"  page  249. 

4.  Report  for  1914,  Bureau  of  Gas,  Philadelphia,  page  7. 


37 

Extracts  From   1915  Report  of  Bureau  of  Gas,  Philadelphia. 
JUDSON  C.  DlCKERMAN,  Chief. 

In  1915  the  Bureau  of  Gas  of  the  City  of  Philadelphia,  under 
the  able  leadership  of  Judson  C.  Dickerman  as  Chief,  made  a  thor- 
ough investigation  of  all  conditions  pertaining  to  the  gas  situation 
not  only  in  Philadelphia  but  in  the  leading  cities  of  the  United 
States.  Their  report  is  most  valuable  and  we  recommend  that  cities 
wishing  to  secure  the  data  first  hand  request  copies  of  the  Reports 
of  the  Bureau  of  Gas  for  the  years  1914  and  1915. 

The  following  is  copied  verbatim  from  the  Report  of  1915  and 
it  shows  that  50  cents  is  a  fair  estimate  of  the  total  cost  per  1,000 
cubic  feet,  including  all  expenses  except  taxes,  operating  expenses 
for  street  lamps  aside  from  gas,  and  returns  on  capital  invested. 
We  quote  from  Appendix  C,  pages  64  and  65 : 

"The  estimated  total  cost  of  50  cents  per  thousand  cubic  feet  of 
gas  sold  includes  materials  (deducting  returns  from  residuals), 
labor,  repairs  and  ordinary  maintenance,  commercial,  office  and  gen- 
eral expense — everything  except  taxes,  operating  expenses  for  street 
lamps  aside  from  gas,  and  returns  on  capital  invested.  This  would 
also  pay  the  salaries  of  the  engineers  and  executives,  upon  whom  the 
credit  of  expert  management  rests  and  not  on  the  stockholders  and 
promoters.  The  lessees  pay  no  local  or  state  taxes  or  fees  on  the 
property  utilized  for,  or  the  income  from  the  gas  business,  except 
a  tax  on  horses  owned.  The  costs  given  below,  figured  on  the  basis 
given  above  are,  therefore,  directly  comparable  with  the  costs  in 
Philadelphia. 

"E.  W.  Bemis's  review  of  W.  J.  Hagenahs'  investigation  of  the 
Peoples  Gas  Light  &  Coke  Company  of  Chicago,  gives  a  total  cost 
for  the  above  items  of  gas  sold  as  41.48  cents  per  thousand  feet  in 
1909.  In  1904,  cost  was  not  over  45.45  cents.  Also  it  states  that  in 
Milwaukee  in  1910,  the  cost  was  32  cents.  The  report  of  the  Min- 
neapolis Gas  Company  to  the  city  authorities  for  1912  and  1913 
shows  cost  of  46.76  and  49.5  cents.  New  Jersey  Public  Service 
Corporation  costs  (including  taxes)  for  its  large  city  business  as 
per  court  records,  1911-12,  47  to  50  cents.  City  of  Duluth  showed 
1909,  51.6  cents.  New  York  City,  average  of  reports  of  all  oper- 
ating gas  companies  to  the  Public  Service  Commission  for  1908 
showed  cost  of  47.12  cents. 

"The  same  company's  costs  in  1909  were  42.5  cents. 

1910  42.5  cents. 

1911  43.2  cents. 

1912  45.7  cents. 

"For  the  New  York  Consolidated  Gas  System,  excluding  the 
smaller  companies,  costs  were 

1909 — 41.0  cents  per  thousand  feet  sold 
1910—41.0  cents 
1911—41.6  cents 
1912—44.0  cents 


38 

"According  to  the  reports  of  the  Massachusetts  Gas  &  Electric 
Light  Commission,  costs  in  four  seaport  cities  and  two  interior  cities 
were  as  follows : 

Boston    Cambridge    Fall  River    Lynn    Springfield    Worcester 

1910  .  .  39.6  49.9  46.0  40.0  48.6  46.3 

1911    38.4  48.1  44.1  41.7  47.2  43.9 

1912    40.2  48.2  47.0  42.0  49.8  47.6 

1913    39.0  48.3  45.7  44.4  49.9  47.8 

Average    ....  39.3  48.6  45.7  42.0  48.9  46.4 

"These  are  all  smaller  cities,  using  coal  and  oil  at  higher  prices 
than  Philadelphia,  most  of  them  with  less  consumption  per  con- 
sumer. 

"In  1901  four  small  companies  in  Massachusetts,  selling  less 
than  10  per  cent  as  much  gas  as  the  Philadelphia  Works  at  that 
date,  reported  an  average  cost  of  56  cents. 

"The  Washington,  D.  C.,  Gas  Lighting  Company  reports  costs  in 
1911,  1912,  1913  and  1914  of  47.55,  43.6,  44.7  and  46.5  cents  re- 
spectively, an  average  of  45.6  cents  yet  selling  only  25  per  cent  as 
much  gas  as  in  Philadelphia. 

"In  1914  the  manager  of  the  Kenosha,  Wis.,  plant  in  an  address 
to  gas  men,  used  43.4  cents  as  a  cost  for  gas. 

"The  Consolidated  Gas,  Electric  Light  and  Power  Company  of 
Baltimore  reports  to  the  Maryland  Public  Service  Commission  a 
cost  of  37.4  cents.  This,  however,  includes  much  gas  purchased  at 
8.2  cents,  the  2,600,000,000  cubic  feet  of  gas  made  by  the  company 
costing  42.1  cents. 

"The  reports  of  the  trustees  of  the  Northern  Liberties  Gas  Com- 
pany of  Philadelphia  show  a  total  cost  including  taxes,  but  not  in- 
cluding capital  charges,  an  average  for  five  years  (1909-13)  of  not 
over  45  cents,  and  for  ten  years  not  over  46  cents,  and  fifteen  years 
(1900-14)  average  of  50.7  cents;  see  statement  page  21. 

"It  is  not  unreasonable  to  assume  that  during  the  past  four  or 
five  years  the  costs  in  Philadelphia  have  not  exceeded  45  cents. 
In  view  of  the  size  of  the  business  and  the  reputation  for  skill  en- 
joyed by  the  lessees'  management,  an  estimate  of  40  cents  would  ap- 
pear highly  reasonable.  Undoubtedly,  during  the  first  few  years 
of  the  lease,  with  smaller  production  and  extensive  repairs  needed, 
the  cost  may  have  been  considerably  higher,  possibly  55  or  even  60 
cents.  An  average  of  50  cents  for  seventeen  years  is  certainly 
liberal,  especially  when  it  is  considered  that  the  lessees  have  been 
allowed  to  charge  to  'betterments,  alterations,  improvements,  re- 
movals and  extensions'  such  items  as  they  pleased  without  engineer- 
ing criticism  from  public  authority. 

"An  interesting  sidelight  is  that  a  privately  owned  works, 
appraised  in  1897  as  worth  $1,060,000  with  a  capacity  of  16,000,000 
cubic  feet  per  day,  was  selling  22-candle-power  gas  to  the  city  for 
37  cents  per  thousand.  Assuming  a  minimum  of  15  per  cent  for 


39 

return  on  investment  and  depreciation,  leaves  a  maximum  cost  de- 
livered to  the  holder  of  29  cents.  As  it  is  highly  improbable  that 
the  projectors  of  that  deal  were  to  be  satisfied  with  9  or  10  per  cent 
profit  on  the  actual  investment,  it  is  probable  that  the  real  cost  of 
the  gas  was  not  over  25  cents  per  thousand.  Adding  the  usual  dis- 
tribution and  general  expense  to  this  means  that  gas  of  that  quality 
could  easily  have  been  sold  at  a  total  cost,  excluding  return  on 
capital,  of  50  cents. 

"Widnes,  England,  is  selling  gas  at  a  net  cost  of  16  cents,  ex- 
cluding returns  on  capital  but  including  taxes  of  all  kinds.5 

The  Philadelphia  Report  of  1915  also  gives  details  respecting  the 
Northern  Liberties  Gas  Company  which  operates  in  the  same  city 
but  which  has  never  been  municipally  owned.  After  examining 
the  public  reports  of  this  company,  it  was  found  that  it  had  had  a 
continuous  dividend  record,  beginning  two  or  three  years  after  its 
establishment.  Most  of  this  time  it  had  paid  8  per  cent  or  better, 
occasionally  exceeding  12  per  cent  and  even  14  per  cent  annual 
dividends. 

It  was  also  found  that  the  net  cost  of  gas  per  1,000  cubic  feet 
had  not  exceeded  45.2  cents  during  the  five  year  period  from  1910 
to  1914.  This  was  the  average  total  cost  of  manufacture  and  distri- 
bution, including  all  material,  labor  and  depreciation.  From  1905 
to  1914  the  corresponding  total  cost  was  45.6  cents,  and  from  1890 
to  1914  it  was  estimated  to  be  50.6  cents. 

Following  the  usual  method  of  fictitious  book-keeping  practiced 
by  most  public  service  corporations  with  watered  securities,  certain 
"capital  expenses"  were  added  to  the  real  cost  of  operation  in  order 
to  make  it  appear  that  the  gas  really  cost  more  than  it  actually  did. 
The  following  shows  how  the  "cost"  price  was  raised : 

Amount  added  for 

Years                          Cost                 "capital  expenditures"  Total  cost 

1910-14                      45.2  cents                      15.85  cents  60.40  cents 

1905-14                      45.6  cents                      10.30  cents  55.90  cents 

1890-14                      50.6  cents                      11.65  cents  62.25  cents 

Since  the  company  evidently  feared  that  the  public  would  take 
action  to  secure  a  lower  rate,  the  accounts  were  "juggled"  as  shown 
above  so  that  it  would  appear  from  their  own  books  that  the  gas  cost 
them  60.40  cents  (1910-14)  on  which  it  was  necessary  that  they 
should  make  a  "reasonable"  profit,  so  accordingly  they  charged  $1.00 
per  1,000  cubic  feet  on  which  they  made  a  clear  profit  of  about  40 
cents. 

The  following  is  quoted  from  page  12  of  the  1915  Report  of  the 
Bureau  of  Gas  of  Philadelphia  in  reference  to  this  company: 

"The  net  profits  above  both  operating  and  capital  account  expen- 
ditures on  the  $475,000  outstanding  capital  stock  have  therefore 
been  15  per  cent,  or  almost  40  cents  per  M.,  sold  for  the  past  ten 

5.    Appendix  C,  1915  Report  of  Bureau  of  Gas,  Philadelphia, 


40 

years,  and  in  sixteen  years  12  per  cent,  while  also  providing  out  of 
receipts,  capital  necessary  to  enlarge  the  works  from  sales  of  80,- 
000,000  to  180,000,000  cu.  ft.  per  year.  Since  1908  the  selling  price 
of  gas  has  been  $1." 

Gas  Facts. 

To  call  special  attention  to  important  facts  proven  in  their  inves- 
tigation, the  Bureau  of  Gas  of  Philadelphia  printed  the  following 
salient  points  at  the  beginning  of  the  Report  for  1915.  These  are 
as  follows: 

"60  CENTS  IS  THE   TOTAL   COST    OF   GAS,  PER 
THOUSAND  FEET,  DELIVERED  TO  PHILADEL- 
PHIA CONSUMERS. 

5    CENTS   ADDITIONAL   MEANS   A   CLEAR  AN- 
NUAL PROFIT  OF  $500,000. 
65  CENTS  SHOULD  BE  THE  PRICE  OF  GAS  TO 

CONSUMERS. 
U.  G.  I.  CO.  GETS  80  CENTS  FOR  GOOD  QUALITY 

GAS. 

NORTHERN  LIBERTIES  CO.  GETS  $1.00  FOR  A 
POORER  QUALITY  GAS." 

"45  Cents,  or  less,  per  1,000  cubic  feet  sold  is  the  operating  cost  in 
many  large  cities." 

"5  Cents  per  1,000  cubic  feet  sold  is  more  than  the  cost  value  of  the 
free  gas  and  lamps  now  given  Philadelphia." 

"10  Cents  per  1,000  cubic  feet  sold  exceeds  the  reported  yearly  cost 
for  improvements  and  extensions  to  Philadelphia  Gas  Works 
for  several  years  past." 

"The  $20,000,000  reported  by  the  United  Gas  Improvement  Com- 
pany as  having  been  expended  for  extensions,  improvements, 
etc.,  since  1897  have  been  paid  back  by  the  profits." 

"10  Cents  per  1,000  cubic  feet  sold  has  been  the  average  clear  profit 
during  the  past  17  years  over  and  above  this  refund." 

"20  to  25  Cents  per  1,000  feet  sold  is  the  present  clear  profit  to  the 
United  Gas  Improvement  Company  over  all  expenses  for  oper- 
ation, extensions  and  improvements.  None  of  this  is  applied 
as  returns  on  the  previous  investment,  which  has  been  repaid." 

"5  Cents  per  1,000  feet  sold,  as  clear  profit  to  the  lessees,  would 
mean  now  $500,000  per  year,  and  toward  the  end  of  the  lease 
nearly  $1,000,000  per  year." 

"65  Cents  per  1,000  feet,  as  a  fair  selling  price,  would  pay  for  all 
operating  expenses,  all  extensions,  fair  taxes  to  the  city,  and  a 
handsome  profit  to  the  lessees" 

"5  to  7  Cents  per  1,000  feet  is  usually  paid  as  taxes  in  other  states. 
Philadelphia  Gas  Companies  pay  nothing  in  taxes." 


41 

"Northern  Liberties  Gas  Company  makes  large  profits  while  furnish- 
ing lower  quality  gas  to  its  district  than  the  remainder  of  the 
city  receives  from  the  United  Gas  Improvement  Company." 

Consolidation  of  Gas  Companies  Force  Up  Gas  Rates. 

Opinion  of  EDMUND  J.  JAMES,  Ph.  D.,  now  President  of  the  Univer- 
sity of  Illinois. 

"Every  American  city  which  has  permitted  competing  gas  com- 
panies to  lay  pipes  in  the  streets,  has  suffered  through  the  consoli- 
dation of  the  companies,  the  capital  having  been  increased,  and  the 
consumers  forced  to  pay  higher  prices  for  their  experience, .  . . 

"Before  consolidation  the  price  of  gas  in  New  York  City  was 
seventy-five  cents  per  thousand  feet,  but  as  soon  as  the  six  com- 
panies came  together  they  watered  their  capital  from  $18,308,920 
to  $39,078,000,  and  raised  the  price  of  gas  one  dollar  per  thousand 
feet,  making  it  one  dollar  and  seventy-five  cents.8 

"In  Baltimore  the  price  of  gas  was  advanced  seventy-five  cents 
per  thousand  feet;  in  Harrisburg  it  was  raised  from  one  dollar  to 
two  dollars:  in  Paterson,  N.  J.,  and  in  Savannah,  Ga.,  the  price 
was  also  raised/' 

"In  Detroit,  Mich.,  a  stringent  charter  was  granted  upon  the  filing 
of  a  bond  to  secure  the  city  against  the  possible  combination  of  the 
old  company  with  the  new  one ;  but  in  spite  of  this  iron-clad  agree- 
ment a  combination  was  effected,  and  the  people  were  forced  to  pay 
not  only  all  the  expense  of  the  gas  war  and  the  duplication  of  works, 
but  also  a  large  dividend  on  an  inflated  capitalization."7 

Effect  of  Public  Control  of  Private  Management  in  England. 
Opinion  of  EDWARD  W.  BEMIS,  Ph.  D.  (Writing  in  1905). 

"There  is  surely  a  close  connection  between  the  fact  that  the 
English  consume  four  times  as  much  gas  per  capita  as  do  we,  and 
the  other  fact  that  gas  is  sold  for  less  than  75  cents  per  1,000  cubic 
feet  on  the  average,  or  only  at  about  half  the  current  American 
prices.  These  lower  prices,  with  the  great  social  as  well  as  finan- 
cial benefits  resulting  therefrom  in  the  saving  of  labor  from  the 
substitution  of  gas  for  coal  and  oil,  are  not  due  to  any  great  dif- 

6.  When  later  on  the  law  in  New  Ycrk  required  a  lowering  of  the  rates,  the  company 
refused  to  comply  and  forced  the  consumers  to  continue  to  pay  the  rates  charged  or  else 
go  without  gas.     The  courts  were  then  invoked  by  the  city,  and  pending  the  legal  contro- 
versy which  the  company  continued  for  many  years  hoping  to  finally  tire  out  the  people, 
the  case  was  carried  to  the  United  States  Supreme  Court  which  decided  in  favor  of  the 
city  and  ordered  the  company  to  refund  to  the  consumers  the  amount  illegally  extorted 
from  them  totalling  about  $12,000,000.     To  prevent  the  natural  fall  of  the  company's  stock 
on  the  market  incident  to  this  decision,  the  directors  promptly  issued  a  public  statement 
admitting  they  still  had  over  $10,000,000  cash  reserve  left  from  their  profits  in  their  treas- 
ury, after  having  paid  the  $12,000,000   illegally   extorted  from   the   consumers! 

7.  Edmund  J.  James,  Ph.  D.,  in  a  paper  read  before  the  Social  Science  Association  at 
Philadelphia,  February   11,   1888,  entitled,   "The  Relation  of  the  Modern   Municipality  to 
the  Gas  Supply"    (page    14),  and  published  by  that  association.     Dr.   James  was  then  a 
professor  in  the  University  of  Pennsylvania  and  is  now  president  of  the  University  of 
Illinois. 


42 

ference  in  the  cost  of  placing  gas  in  the  burner  in  the  two  countries. 
Rather  is  the  lower  price  and  more  extensive  use  of  gas  abroad  due 
to  the  public  control  of  private  management,  and  to  the  prospect  of 
city  ownership  ever  impending  over  the  English  private  companies, 
if  they  do  not  fairly  approach  the  record  of  the  publicly-owned 
companies." — Edward  W.  Bemis  in  "Municipal  Monopolies,"  p.  628. 

Other   Sources   of   Information   on   "Cost"   and   "Profit"    in   this   Work. 

The  attention  of  the  reader  is  called  to  other  portions  of  this 
work  in  which  details  of  cost  and  profit  are  discussed  in  full. 

The  Report  of  William  Newbigging  to  the  City  of  Kalamazoo 
"On  the  Gas  Supply  of  the  City  of  Kalamazoo,  and  on  the  Proposal 
to  Establish  a  Municipal  Plant"  gives  the  opinion  of  the  world's 
greatest  gas  expert  that  75  cents  should  cover  all  possible  expenses 
and  make  profits  large  enough  to  pay  for  a  municipal  plant  in  20 
years  in  addition  to  paying  all  current  and  accrued  accounts. 

The  Chapter  on  Municipal  Ownership  of  Gas  Plants  in  Europe 
gives  details  in  full  respecting  the  cost,  receipts,  and  net  profits  of 
gas  plants  which  have  been  municipally  owned  for  a  great  many 
years. 

The  report  of  the  municipal  plant  at  Richmond,  Virginia,  which 
has  successfully  conducted  the  largest  municipal  plant  in  America 
since  the  days  before  the  Civil  War,  and  which  has  been  selling 
gas  at  80  cents  per  1,000  cubic  feet,  is  most  valuable. 

Attention  is  also  called  to  the  operation  of  the  gas  works  of  the 
City  of  Duluth,  Minnesota  where  gas  is  sold  from  50  cents  to  75 
cents  per  1,000  cubic  feet. 


CHAPTER  VI. 
MUNICIPAL  GAS  WORKS  IN  VIRGINIA. 

Richmond  Municipal  Gas  Works 
A  Record  of  Achievement. 

Within  the  limits  of  the  beautiful  city  of  Richmond,  Virginia, 
often  called  "the  modern  Rome,"  stand  many  monuments  of  the 
independent  spirit  of  democracy  from  which  evolved  the  world's 
greatest  charter  of  human  rights — "The  Declaration  of  Inde- 
pendence." The  glory  of  Thomas  Jefferson  and  his  illustrious  col- 
leagues still  hallow  the  place,  and  this  city  which  has  furnished  to 
our  nation  so  many  of  its  famous  heroes  and  statesmen,  furnishes 
today  also  a  living  example  of  progress  and  justice  in  applied 
democracy. 

Richmond  owns  its  gas  works,  water  works  and  electric  light 
plant,  all  of  which  are  operated  with  such  high  success  that  the 
municipalization  of  street  railways  also  is  hoped  to  be  accomplished. 
Because  of  the  high  success  of  its  gas  works  and  the  fear  on  the 
part  of  the  great  financial  interests  that  control  gas  in  America  that 
a  knowledge  of  the  true  facts  respecting  this  plant  would  rapidly 
increase  municipal  ownership,  these  interests  have  persistently  pub- 
lished false  and  misleading  statements  regarding  this  plant.  Because 
of  this  dishonorable  campaign  which  will  undoubtedly  be  continued, 
greater  details  will  be  given  herein  from  the  official  records  as  well 
as  from  the  statements  of  high  authorities  respecting  its  history  and 
success  in  the  past  as  well  as  in  the  present. 

$271,869.61  Profit  on  80  Gent  Gas  in  1916. 

The  1916  report  of  the  Richmond  Gas  Works  shows  the  flour- 
ishing condition  of  the  plant  at  the  present  time.  The  excess  of 
receipts  over  expenditures  was  $257,938.80,  which,  added  to  the 
amount  consumed  by  the  city  and  public  institutions  which  was  not 
charged  for,  made  the  total  amount  in  favor  of  the  works  at  the 
close  of  the  year  $271,869.61  as  shown  in  detail. 

During  the  year  the  works  produced  718,142,300  cubic  feet  of 
gas  which  was  an  increase  of  170,588,019  feet  over  that  of  the 
preceding  year.  As  is  the  case  with  all  the  gas  works  of  the  world, 
there  is  a  loss  from  condensation  and  in  leakage  of  the  pipes  over 
the  city.  In  this  case,  the  loss  due  to  the  above  cause  was  8.48  per 
cent,  which  is  less  than  the  average  loss  of  the  works  under  private 


44 

ownership  in  America  so  far  as  ascertained.    The  consumption  was 
as  follows : 

Private  consumption 638,123,737  cubic  feet 

Public   consumption 14,606,600      "         " 

Used  at  the  Works 4,381,637      " 

Total  consumption 657,111,637      " 

The  city  has  800  incandescent  high  candle  power  lamps  in  use 
all  night  every  night  in  the  year,  and  81  lamps  are  in  front  of  the 
various  churches,  which  are  in  use  two  nights  each  week  during 
church  services,  thus  making  a  total  of  881  lamps.  The  amount  of 
gas  thus  consumed  by  the  city,  valued  at  80  cents  per  1,000  cubic 
feet  was  worth  to  the  city  $11,685.28. 

The  quality  of  gas  supplied  during  the  year  was  much  higher 
than  that  supplied  by  privately  owned  plants,  averaging  19.8  candle 
power.  This  was  furnished  consumers  at  80  cents  per  1,000  cubic 
feet,  which  is  about  10^  cents  less  than  the  average  price  charged 
by  the  companies  in  the  United  States  as  shown  on  page  19  of  the 
report.  "The  cost  at  the  consumer's  burner"  for  the  manufacture 
and  distribution,  including  materials,  labor  and  maintenance  of 
plant  and  distributing  system  was  but  35.51  cents  per  1,000  cubic 
feet;  adding  this  to  the  selling  and  general  expenses  which  include 
advertising,  salaries,  etc.,  the  total  actual  cost  was  40.81  cents  per 
1,000  cubic  feet.  The  selling  price  being  80  cents  gave  the  city  a 
gross  profit  as  already  stated,  $271,869.61.  As  a  matter  of  book- 
keeping, however,  and  to  keep  the  finances  of  the  works  in  the  best 
possible  condition,  a  charge  of  3  per  cent  as  a  reserve  for  "depre- 
ciation" is  made  against  the  works,  although  this  appears  to  be 
really  an  unjust  charge  because  the  works  are  kept  constantly  in 
a  state  of  high  efficiency  and  repair.  This  fund  amounts  to  $43,- 
394.32,  being  6.8  cents  per  1,000  cubic  feet  of  gas,  and  if  added  to 
the  cost,  there  is  still  a  profit  to  the  city  of  $228,475.29,  making  the 
total  cost  per  1,000  cubic  feet  47.61  cents.  But  the  city  also  desires 
to  make  large  revenues  from  this  plant  to  reduce  taxation  and 
create  public  improvements,  hence  it  charges  the  plant  as  "taxation" 
$20,017.21,  which  is  a  larger  tax  than  is  charged  on  the  average 
for  similar  works  under  private  ownership.  But  there  is  still  left, 
after  deducting  "depreciation"  and  "taxes,"  $208,458.08  as  net 
profits. 

To  further  increase  the  money  in  the  treasury,  the  city  uses 
these  works  as  a  revenue  producer  to  provide  the  means  for  public 
improvements,  and  charges  as  "interest"  on  the  plant  investment 
value  4  per  cent  annually,  amounting  to  $60,641.27,  notwithstanding 
the  fact  that  the  plant  has  been  entirely  out  of  debt  for  many  years, 
having  paid  for  itself  several  times  over  in  profits. 

These  three  items,  "taxation,"  "depreciation"  and  "interest," 
which  are  known  as  "fixed  charges,"  aggregate  $123,052.80,  or  19 
cents  per  1,000  cubic  feet,  yet,  even  after  deducting  these  charges, 


45 

which  are  chiefly  a  gift  from  the  plant  to  the  city,  there  still  re- 
mains from  the  gross  profits  in  favor  of  the  works  $148,817.81. 

From  the  fact  that  the  plant  is  maintained  in  high  class  con- 
dition, and  has  paid  for  itself  many  times  out  of  the  profits,  the 
fixed  charges  for  depreciation,  taxes  and  interest  are  not  a  fair 
charge  from  the  standpoint  of  cost  of  production  and  distribution, 
so  that  40.81  cents  represents  the  full  cost.  For  the  purpose  of 
comparison  with  private  plants  which  pay  taxes,  the  tax  charges, 
$20,017.21,  (though  excessive)  may  be  deducted,  which  will  leave 
for  profits,  $251,852.40. 

Because  of  the  campaign  of  misstatement  on  the  part  of  the 
companies,  and  because  of  his  desire  to  personally  verify  the  truth 
or  the  error  of  the  official  records,  the  author  made  two  visits  to 
this  plant  at  an  interval  of  about  three  years.  These  visits  proved 
conclusively  to  him  that  all  of  the  claims  made  for  the  success  of 
the  plant  at  Richmond,  as  shown  in  the  official  reports,  were  true. 

RICHMOND  GAS  WORKS 
Extracts  From  1916  Official  Report. 

Average  illuminating  candle  power 19.86 

Average  heating  units  (B.  T.  U.) 609.8 

Details  given  at  the  rate  of  1,000  cubic  feet 

Manufacturing  cost  of  coal  gas 27.95  cents 

Manufacturing  cost  of  water  gas 25.35 

Total  cost  of  coal  and  water  gas  manufactured  less  amount  used 

at  the  plant 26.20 

Distribution  cost  of  gas   sold 6.84 

Total  selling  expense,  less  amount  used  for  advertising  display 

(Municipal   exhibit) 4.53 

General  expense 0.74 

Total  cost  to  manufacture,  distribute,  and  sell 40.81 

Total  "fixed  charges"  1 19.00 

Total  cost  of  operating  and  "fixed  charges" 59.81 

Selling  price  of  gas  at  burner 80.00 

Early  History  of  the  Richmond  Municipal  Gas  Works. 

The  wide-known  fact  that  from  time  to  time  for  many  years  vari- 
ous companies  have  used  every  influence  in  their  power  to  induce 
Richmond  to  sell  its  gas  works  and  have  been  willing  to  pay  a  price 
which  they  claim  to  be  more  than  fair  value,  should  in  itself  be  a 
significant  answer  to  their  untrue  statements  respecting  its  proved 
efficiency.  The  uniform  success  of  this  plant  as  compared  with 
that  of  private  plants  in  other  cities  is  so  well  known  that  special 
interest  attaches  itself  to  an  early  history  of  the  Richmond  gas 
works  which  appears  in  an  article  ably  written  by  Pres.  Edmund  J. 
James,  now  President  of  the  University  of  Illinois  on  the  subject, 

1.  This  includes  interest  paid  the  city  (although  the  plant  is  out  of  debt,  having  paid 
for  itself  long  ago  out  of  the  profits),  for  the  city  desires  to  get  additional  revenue  for 
public  purposes  and  charges  "interest"  on  the  plant  value.  It  also  includes  $20,000 
taxes  and  depreciation,  although  the  plant  is  maintained  in  first-class  shape. 


46 

"The  Relation  of  the  Modern  Municipality  to  the  Gas  Supply," 
read  before  the  Philadelphia  Social  Science  Association  in  1886. 
This  high  authority  says: 

"The  city  of  Richmond,  Virginia,  after  sending  a  committee  of 
seven  of  the  city  council  to  the  cities  of  Baltimore,  Philadelphia, 
New  York  and  Boston,  to  investigate  the  gas  business  as  conducted 
in  those  centers,  decided  in  1850,  to  erect  and  manage  its  own 
works.  They  were  in  successful  operation  by  the  22nd  of  Febru- 
ary, 1851,  and  have  ever  since  been  managed  by  the  city.  The  price 
of  gas  which  stood  at  $4.00  per  thousand  feet  in  1851,  was  grad- 
ually reduced  to  its  present  figure,  $1.50  to  private  consumers  and  is 
furnished  free  to  the  city.  The  number  of  consumers  increased 
from  1,500  in  1854  to  5,000  in  1885,  and  the  amount  consumed 
from  300,000  cubic  feet  in  the  former  year  to  138,004,258  in  the 
latter.  Although  the  total  consumption  is  at  present  relatively 
small  and  the  cost  of  manufacture  is  therefore  relatively  high,  yet 
the  works  in  1885,  received  $52,093  more  than  they  expended, 
besides  furnishing  nearly  29,000,000  cubic  feet  of  gas  to  the  city  for 
public  lamps,  etc.,  free  of  charge ;  which  at  the  same  rate  as  charged 
to  private  consumers  would  represent  about  $14,500  more,  or  a 
total  of  more  than  $86,000  profit,  being  equal  to  a  rate  of  17  per 
cent.  The  gas  averaged  more  than  18  candle  power.  Gas  was 
manufactured  at  the  works  in  December,  1884,  at  a  cost  of  49  cents 
in  the  holder.  The  opinion  of  citizens  of  Richmond  in  regard  to 
the  success  of  their  undertaking  may  be  fairly  represented  by  a 
statement  of  the  Hon.  W.  C.  Carrington,  who  in  March,  1886, 
wrote  to  me  as  follows:  'Our  gas  works  have  been  operated  with 
great  success — furnishing  our  public  lights  free  for  streets  and 
buildings,  paying  all  expenses  of  manufacture  and  leaving  in  addi- 
tion almost  enough  profit  to  pay  six  per  cent,  interest  on  the  whole 
cost  of  original  and  additional  construction/  The  manager,  Mr. 
John  H.  Knowles,  wrote  about  the  same  time:  'The  gas  works 
are  the  only  paying  institution  which  the  city  possesses.  Every 
tax-payer  is  a  stock-holder.  I  have  been  first  inspector  and  then 
superintendent  for  thirty-three  years.  The  people,  the  owners  of 
the  works,  seem  satisfied  with  the  management/  In  his  annual 
report  of  1882,  Mr.  Knowles  stated  that  it  becomes  more  and  more 
apparent  as  time  rolls  on,  that  it  was  wise  and  prudent  in  the  city 
to  own  her  own  gas  works;  her  ownership  prevents  opposition 
works  or  imposition ;  and  it  is  now  generally  conceded  that  one  gas 
works  can  supply  gas  cheaper  than  two  in  the  same  city,  and  the 
profits  made  by  the  works  go  into  the  treasury  and  are  equivalent 
to  relieving  the  people  of  that  amount  of  tax;  besides  the  works 
are  becoming  more  valuable  every  year." 

"An  attempt  was  made  in  1882  by  a  private  company  to  per- 
suade the  city  to  sell  to  them  its  gas  works.  It  held  out  what 
seemed  to  be  most  extraordinary  inducements  in  the  way  of  cheap 
and  rich  gas,  etc.  After  a  careful  investigation,  during  which  a 


47 

committee  was  again  sent  in  order  to  examine  the  works  of  many 
other  cities,  the  common  council,  by  a  large  majority,  decided  that 
it  was  the  best  policy  for  the  city  to  keep  its  works  and  manage 
them  itself.  It  is  worthy  of  note  that  the  committee  which  reported 
in  favor  of  the  city's  keeping  its  own  works  was  of  the  opinion 
that  'as  a  matter  of  fact  there  is  more  danger  to  be  feared  from 
the  presence  of  a  wealthy  corporation  having  valuable  franchises, 
seeking  to  influence  our  elections  by  corrupt  means,  than  there  is 
that  political  harm  will  result  from  the  city's  control  of  its  own 
gas  department/  It  is  safe  to  say,  that  the  management  of  the  pub- 
lic works  in  Richmond  will  compare  favorably  from  any  point  of 
view,  with  that  of  any  private  works  in  the  country."2 

Labor  and  Wages  in  the  Richmond  Municipal  Gas  Plant. 

In  the  report  published  in  1907  of  the  special  committee  ap- 
pointed by  the  National  Civic  Federation  to  investigate  the  public 
utilities  of  the  United  States  and  of  Europe,  and  of  which  com- 
mittee, Prof.  John  R.  Commons,  Ph.  D.  was  the  chairman,  is  the 
following  :8 

"The  wages  paid  by  the  Richmond  municipal  plant,  all  of  whose 
employees  are  white,  are  90  per  cent,  higher  than  the  wages  paid 
to  negroes  who  do  similar  work  in  the  Atlanta  private  undertaking, 
and  the  wages  paid  to  white  mechanics  and  apprentices  at  Rich- 
mond are  30  per  cent  to  120  per  cent  higher  than  those  paid  to  the 
corresponding  white  employees  by  the  Atlanta  company." 

In  the  same  report  (pp.  148-149)  is  a  further  reference  to  this 
plant,  as  follows: 

"Richmond  has  had  municipal  ownership  of  its  gas  works  since 
1852,  and  during  that  time  has  vied  with  Atlanta,  among  all  the 
cities  of  the  South,  in  leadership  in  the  reduction  in  price,  while  its 
expert  accountants  who  have  audited  the  books  have  reported  that 
the  plant  has  not  only  been  paid  for  out  of  earnings,  but  has  turned 
into  the  city  treasury  over  $1,500,000  in  addition. 

"It  is  therefore  greatly  to  be  regretted,  from  the  standpoint  of 
our  investigation,  that  the  city  authorities  would  not  permit  a  full 
investigation  to  be  made  by  the  Committee.  The  mayor,  the  chair- 
man of  the  gas  committee  of  the  Upper  House  of  the  City  Council 
and  the  superintendent  of  the  works  united  in  telling  a  member  of 
the  Committee,  Mr.  Bemis,  that  a  recent  investigation  had  been 
considered  very  unfair,  and  the  people  had  been  so  worked  up 
over  it  and  over  other  suggestions  for  a  lease  that  the  question  of 
the  retention  of  the  plant  had  largely  entered  into  the  election  in 

2.  Edmund  J.  James,   Ph.   D.,  in  "The   Relation  of  the  Modern   Municipality  to  the 
Gas  Supply,"  written  when  Professor  of  Public  Science  and  Administration  in  the  Uni- 
versity  of   Pennsylvania   and   published   by   the  .American    Economic   Association   in    itt 
issue,  Vol.   1,  Nos.  2  and  3    (May  and  July,   1886)   pp.   51-53. 

3.  National   Civic   Federation    Report:    "Municipal   and   Private    Operation    of   Public 
Utilities,"  Part  I,  Volume  1,  pp.   110-111. 


48 

the  spring  of  1906,  and  the  council,  with  only  one  dissenting  voice, 
voted  to  retain  and  improve  the  gas  works.  These  officials  stated 
that  more  of  the  profits  had  gone  into  the  city  treasury  and  less  into 
improvements  of  the  plant  than  desirable  from  the  standpoint  of 
keeping  the  plant  in  first  class  shape,  but  even  the  thorough  modern- 
izing of  the  plant  would  not  cost  one-half  as  much  as  it  has  turned 
over  in  cash  to  the  city  during  the  last  fifteen  years.  Improvements 
were  at  that  time  being  voted  by  the  council,  but  it  was  feared  that 
if  another  investigation  were  entered  upon,  whose  report  would 
probably  not  be  published  for  many  months,  this  fact  would  be 
urged  as  an  excuse  for  delaying  the  improvements  and  extensions 
until  the  appearance  of  the  report. 

"Fortunately,  before  this  decision  was  reached  by  the  Richmond 
authorities  our  labor  experts,  Messrs.  Sullivan  and  Commons,  had 
made  a  study  of  the  plant.  They  reported  a  good  city  government, 
comparatively  free  from  the  spoils  system  and  from  graft.  They 
also  reported  that  the  workmen  employed  there  were  an  excellent 
class  of  white  labor,  who  were  paid  nearly  twice  as  high  wages  as 
were  the  negro  laborers  in  the  gas  works  of  Atlanta." 

Rates    Per   1,000    Cubic    Feet   Charged    by   Municipal    and   Private   Plants    in 

Virginia. 

Investigation  of  the  rates  charged  for  gas  by  private  and  by 
municipal  plants  in  the  United  States  shows  that  the  municipal 
plants  sell  gas  per  1,000  cubic  feet  at  an  average  of  from  15  cents 
to  20  cents  cheaper  than  do  the  private  plants;  and  in  addition, 
even  at  these  lower  rates,  the  municipal  plants  make  a  profit  which 
benefits  the  public  through  reduced  taxation  and  greater  civic  im- 
provement. A  striking  example  of  this  is  shown  in  the  report  of 
Richmond,  Virginia,  which  sold  gas  in  1917  at  80  cents  and  made  a 
net  profit  of  $208,458.08. 

The  rates  charged  by  the  public  plants  in  the  State  of  Virginia, 
as  reported  by  "Brown's  Directory  of  American  Gas  Companies, 
1917,"  are  as  follows: 

Municipal  Plants — Virginia. 

Population  Annual  Sales           Maximum  Rate 

City                             Supplied  of  Gas  for  Gas 

Alexandria    21,000  46,023,000  cu.  ft.  $1.30 

Charlottesville   12,000  23,000,000      "  125 

Danville 15,000  71,962,600      "  1.00 

Fredericksville    6,200  18,090,000      "  1.10 

Richmond   134,700  638,123,737      "  .80 


Average  159,439,867  cu.  ft.  $1.09 


49 


Private  Plants— Virginia 

Population  Annual  Sales          Maximum  Rate 

City  Supplied  of  Gas  for  Gas 

Graham (Organization  not  completed)  $1.50 

Lynchburg 20,000  60,000,000  cu.  ft. 

Newport  News 45,000  135,250,000 

Norfolk  86,000  394,000,000 

Petersburg   25,582  85,533,200 

Portsmouth    23,000  110,000,000 

Richmond   8,000  50,000,000 

Roanoke    ....40,000  113,000,000 

Salem  (Organization  not  completed) 

Staunton   10,000  30,000,000 

Suffolk 6,000  20,000,000 

Winchester  6,000  12,600,000 

Average  7T"  101,038,320  cu.  ft.  $1.27 

It  will  be  noted  from  the  above  that  the  average  maximum  price 
at  which  the  municipal  plants  sell  gas  per  1,000  cubic  feet  is  $1.09 
and  the  average  maximum  price  which  the  private  plants  charge  is 
$1.27,  the  municipal  plants  selling  gas  18  cents  cheaper  than  do  the 
private  plants.  If  the  1,010,383,200  cubic  feet  of  gas  reported  sold 
by  the  private  plants  of  Virginia  had  been  sold  at  the  average  price 
charged  by  the  municipal  plants  the  consumers  would  have  saved 
$181,868.97  during  1917  alone. 

Beneficial   Effect  of   Municipal   Rates  on  Private   Rates. 

It  is  not  generally  understood  to  what  extent  the  low  rates 
offered  by  municipal  plants  tend  to  lower  the  rates  which  the  private 
companies  put  forth  every  effort  to  raise.  In  the  city  of  Richmond, 
Virginia,  a  part  of  the  people  are  furnished  gas  by  the  Henrico 
County  Gas  Company.  The  price  charged  by  that  company  had 
formerly  been  reduced  from  a  higher  rate  to  90  cents  which  in  the 
spring  of  1918  the  company  asked  to  have  raised  again  to  $1.10  per 
1,000  cubic  feet.  The  feeling  was  general  among  the  consumers 
that  since  the  city  furnished  gas  at  80  cents,  at  which  price  the  city 
made  a  large  profit,  that  the  private  company  should  not  raise  its 
rates  above  90  cents,  and  the  administrative  board  recommended 
that  no  advance  in  rates  be  allowed. 


CHAPTER  VII. 

MUNICIPAL  GAS  WORKS  IN  MINNESOTA. 

Having  given  an  example  of  municipal  operation  of  gas  plants 
in  a  Southern  State,  a  like  example  is  now  furnished  of  municipal 
operation  in  a  Northern  State. 

Municipal  Ownership  of  Gas  in  Duluth,  Minnesota. 

The  city  of  Duluth,  Minnesota  combines  the  operation  of  its  gas 
and  water  departments.  The  net  income  realized  over  and  above 
all  operating  expenses,  together  with  the  depreciation  reserve  set 
aside  for  future  replacements  has  amounted  in  the  last  few  years 
to  $175,000.00,  This  is  used  annually  to  make  extensions  and  bet- 
terments, and  for  replacing  or  enlarging  such  portions  of  the  gas 
and  water  plants  as  may  become  inadequate. 

The  increase  of  gas  consumption  during  the  past  year  (1917) 
has  been  the  largest  net  increase  of  any  year  since  1912;  since 
421,300,100  cubic  feet  of  gas  were  sold  in  1917  which  exceeded  the 
consumption  of  1916  by  37,041,800  cubic  feet. 

When  public  operation  began  in  1898,  there  were  but  1,111 
meters;  now  there  are  12,388.  Then  it  cost  49.68  cents  to  manu- 
facture 1,000  cubic  feet  of  gas;  now  it  costs  10  cents  less.  Then  it 
cost  33.64  cents  for  general  and  distributing  expenses  including 
maintenance;  today  the  same  costs  17.84  cents.  From  the  total  cost 
then  of  $1.53  a  gross  revenue  was  realized  of  $1.3054;  from  the 
total  cost  in  1917  of  66.52  cents  a  gross  revenue  was  had  of  75.82 
cents. 

The  monthly  gas  rates  to  consumers  for  1917  were  as  follows: 

For  general  purposes,  for  first  50,000  cubic  feet $0.75  per  1,000  cu.  ft. 

For  general  purposes,  all  over  50,000  cubic  feet 50  per  1,000  cu.  ft. 

For  heating  of  premises  and  gas  engines  (meters  sepa- 
rately)     50  per  1,000  cu.  ft. 

Penalty  for  each  trip  in  case  of  non-payment  of  water  or  gas $0.50 

The  following  extracts  from  the  1917  Report  are  of  interest: 

"Cost  increase  during  the  year  in  labor  amounts  to  nearly  20%, 
cast  iron  pipe  nearly  70%  in  excess  of  the  previous  year,  brass  goods 
about  10%,  coal,  the  largest  of  any  of  the  necessary  supplies,  133%. 

"The  water  gross  revenue  shows  a  total  increase  of  nearly  $11,- 
000  and  the  gas  increase  of  nearly  $30,000.  The  net  revenues, 
however,  of  the  water  department  after  deducting  all  expenses,  in- 
cluding depreciation  and  interest  charges,  are  some  $16,000.00  less 
than  the  previous  year,  and  the  gas  net  increase  was  but  $2,700.00. 

"A  renewal  of  the  contract  with  the  Zenith  Furnace  Company  to 


51 


supply  the  department  with  gas  was  negotiated  on  October  9th, 
which  reduced  the  cost  of  gas  to  the  department  for  general  pur- 
poses from  40  to  37^  cents,  and  for  gas  used  for  house  heating 
purposes  from  37^2  cents  to  32^  cents  a  thousand  cubic  feet." 

In  spite  of  the  increased  cost  of  operating  and  upkeep,  the  net 
gas  surplus  for  1917  was  $18,671.51,  as  compared  with  $16,038.42 
in  1916,  a  gain  of  $2,703.93. 

Rates    Per    1,000    Cubic   Feet    Charged   by    Municipal    and    Private    Plants    in 

Minnesota. 

Not  only  in  the  extreme  East  of  the  United  States  is  the  rate 
charged  for  gas  in  favor  of  municipal  ownership,  but  in  the  Middle 
West  the  advantage  is  also  apparent.  Here  the  average  rate  charged 
by  all  gas  plants  is  higher  than  is  the  average  price  current  in  the 
Atlantic  Section. 

"Brown's  Directory  of  American  Gas  Companies  for  1917" 
gives  data  for  six  municipal  gas  plants  in  Minnesota  with  which 
comparison  may  be  made  with  the  20  private  plants  in  the  same 
state. 


Municipal  Plants — Minnesota. 


Population 


Annual  Sales 


Maximum  Rate 


City                            Supplied                        of  Gas  for  Gas 

Adams   576  $1.40 

(Plant  to  be  superseded  by  electricity) 

Duluth   70,000  (1910)    384,259,000  cu.  ft.  .75 

Jasper    804                  12,000,000       "  1.25 

Renville 1,239                    3,000,000       "  1.50 

Virginia  12,000                  13,000,000       "  1.35 

West  Minneapolis 4,000                    4,180,500       "  1.40 

Average  83,287,900  cu.  ft.  $1.28 

Private  Plants — Minnesota. 

Population  Annual  Sales  Maximum  Rate 

City                           Supplied                       of  Gas  for  Gas 

Albert  Lea 7,500                  18,000,000  cu.  ft.  $1.50 

Austin    7,000                  23,600,100       "  1.40 

Bemidiji    5,000  (1916)        Not  reported  1.60 

(Plant  under  construction) 
Brainerd  (Operation  started  Oct.,  1916) 

Crookston  6,000                  14,000,000       "  1.65 

Duluth  (Plant  under  construction  to  fur- 
nish gas  to  over  30  neighboring  towns)                     "  1.50 

Excelsior  1,015                    5,000,000       "  1.75 

Faribault   7,000                  35,984,000       "  1.25 

Northfield  3,000                     Not  reported  1.50 

Mankato    14,100                  48,000,000       "  1.25 

Minneapolis    260,000              2,655,993,000       "  .92 

New  Ulm 5,000                  10,000,000       "  1.50 

Owatonna   4,200                  16,000,000       "  1.40 


52 


Red  Wing 12,000  46,000,000 

Rochester    10,000  45,000,000 

St.    Cloud 10,000  20,000,000 

St.  Paul 255,000  1,463,314,500 


So.  St.  Paul 4,500  Not  reported  1 .25 


Stillwater    12,000  27,094,000 

Winona   15,000  84,000,000 


1.40 
1.45 

Average  1.60 
1.05 


1.30 
1.30 


Average   300,799,040  cu.  ft.  $1.40 

Reference  to  the  above  data  shows  that  the  municipal  gas  plants 
in  Minnesota  sold  gas  at  an  average  maximum  rate  of  $1.28  per 
1,000  cubic  feet,  while  the  private  plants  charged  an  average  maxi- 
mum price  of  $1.40,  this  being  12  cents  in  favor  of  municipal 
operation.  Since  the  minimum  rate  charged  by  all  gas  plants  varies 
with  the  quantity  of  gas  used  or  is  regulated  by  a  sliding  scale,  it 
would  be  difficult  to  obtain  an  average  minimum  rate.  However, 
Duluth  sells  gas  as  low  as  50  cents  under  municipal  operation,  while 
the  lowest  rate  charged  by  any  of  the  private  plants  is  75  cents  at 
St.  Paul,  the  minimum  rate  in  this  comparison  therefore  being  25 
cents  lower  under  municipal  operation. 

The  city  of  Duluth  furnishes  an  example  of  the  difference  be- 
tween operation  of  gas  plants  for  service  by  the  municipality  and 
operation  for  profit  by  a  corporation.  The  city  buys  its  gas  from 
the  Zenith  Furnace  Company  and  distributes  it  through  its  munici- 
pally owned  system  selling  it  for  lighting  purposes  at  the  maximum 
price  of  75  cents,  all  over  50,000  cubic  feet  being  furnished  at  50 
cents,  while  it  sells  gas  for  fuel  for  the  purpose  of  heating  premises 
by  gas  at  50  cents,  net.  According  to  "Brown's  Directory  1917," 
a  plant  was  being  constructed  by  the  Northern  Utilities  Company 
at  that  time  which  was  expected  to  furnish  gas  to  about  30  neigh- 
boring towns  at  $1.50  gross  for  light  and  fuel,  while  net  rates  were 
to  slide  from  $1.40  down  to  $1.00. 


CHAPTER  VIII. 

CITIZENS  GAS  COMPANY  OF  INDIANAPOLIS 

A  Model  Franchise  of  a  Model  American  Gas  Company  Which  is  Paving  the 

Way  for  Municipal  Ownership.     Gas  at  55  Cents  Per  Thousand  Cubic 

Feet — The  Lowest  Price  in  the  United  States. 

While  the  corruption  and  extortion  practiced  in  general  by  pub- 
lic service  corporations  has  caused  the  word  "franchise"  to  become 
detested  or  feared  in  the  minds  of  thoughtful  men  as  the  emblem 
of  injustice,  there  is  fortunately  one  bright  example  in  America  of 
a  company  whose  record  is  so  honorable,  and  whose  franchise  is 
so  just,  that  it  is  a  pleasure  to  make  public  a  copy  of  its  franchise 
and  a  brief  history  of  its  accomplishments. 

The  Citizens  Gas  Company  of  Indianapolis  as  at  present  organ- 
ized began  operations  October  1,  1913,  the  result  of  the  merging  of 
two  gas  companies.  At  the  end  of  twenty-five  years,  the  property 
of  the  Citizens  Gas  Company  may  become  the  property  of  the  city 
of  Indianapolis.  This  is  provided  for  in  the  franchise  agreement 
which  states  that  "whenever  a  certificate  holder  shall  have  received, 
by  dividend  or  otherwise,  an  amount  equal  to  the  face  value  of  his 
certificate  of  stock  together  with  interest  thereon  at  the  rate  of  ten 
per  cent,  per  annum,  his  subscription  is  to  be  deemed  fully  paid 
and  cancelled,  and  his  rights  are  to  be  transferred  to  the  city." 

The  terms  are  highly  honorable  and  just  both  to  the  city  and  to 
the  stockholders. 

Among  the  provisions  of  the  franchise,  the  following  will  be 
found  to  be  of  unusual  interest : 

Provision   for  Municipal   Ownership. 

The  franchise  clearly  provides  that  when  the  stockholders  shall 
have  received  the  amount  of  their  original  investment,  by  dividend 
or  otherwise,  with  interest  at  ten  per  cent,  per  annum,  the  entire 
plant  shall  automatically  become  the  property  of  the  city.  Mu- 
nicipal ownership  will  thus  begin  without  any  of  the  contests  which 
have  hitherto  prevailed  whenever  a  city  has  tried  to  assert  control 
of  its  streets  after  the  expiration  of  its  franchise. 

High  Quality  Gas  of  600  British  Thermal  Units,  Voluntarily  Reduced  from 
60c  to  55c  per  1,000  Cubic  Feet. 

The  franchise  provides  that  the  maximum  price  of  gas  charged 
any  consumer  shall  at  no  time  exceed  60  cents  per  1,000  cubic  feet, 
and  that  the  quality  shall  be  such  as  to  contain  not  less  than  600 
British  Thermal  Units  per  cubic  foot. 


54 

It  is  well  known  that  under  modern  existing  conditions  under 
which  gas  is  used  for  lighting,  cooking  and  other  heating  in  the 
home,  that  the  value  of  gas  depends  upon  its  heat  content,  since 
this  causes  the  incandescent  mantles  to  glow,  making  this  kind  of 
lighting  of  far  greater  value  than  that  produced  by  the  open  flame 
jet  which  required  high  candle  power.  Respecting  the  quality  of 
gas  called  for  by  the  franchise,  we  have  been  unable  to  learn  of  any 
complaints  made  by  consumers  concerning  it,  at  any  time. 

About  the  latter  part  of  1916,  the  company  of  its  own  accord 
reduced  the  price  of  gas  to  55  cents  which  it  continued  to  charge 
with  profit  during  1917,  but  in  April,  1918,  it  asked  the  city  author- 
ities for  a  return  to  the  60  cent  rate,  owing  to  conditions  caused  by 
the  war. 

Accounts  to  Be  Made  Public. 

The  franchise  also  provides  that  a  semi-annual  public  statement 
of  the  affairs  of  the  company  shall  be  published  in  detail  in  Indian- 
apolis twice  yearly;  that  the  controller  of  the  city  shall  have  the 
right  to  inspect  books  of  the  company  at  any  time  for  any  purpose; 
and  that  the  city  engineer  shall  have  the  right  to  examine  the  plant 
at  any  time. 

Stock  to  Be  Sold  at  Public  Auction. 

It  is  also  provided  in  the  franchise  that  no  increase  of  capital 
stock  shall  be  made  unless  it  be  submitted  at  public  auction  after  30 
days  notice,  at  the  end  of  which  time,  the  stock  shall  be  sold  at  the 
highest  price  obtainable,  and  if  any  premium  be  obtained  above 
par  value,  it  shall  go  to  the  surplus  stock  of  the  company  and  bear 
no  dividends. 

It  will  thus  be  seen  that  both  the  citizens  of  Indianapolis  and 
the  stockholders  are  absolutely  secured  against  the  speculation  of 
financiers,  or  embezzlement  or  absorption  of  funds  by  the  directors 
for  their  own  use  through  private  contracts  for  material  in  which 
they  make  private  profit,  or  through  those  other  forms  of  malad- 
ministration which  have  almost  universally  been  the  cause  of  injur- 
ing the  credit  of  gas  companies,  and  of  maintaining  high  rate  for 
service. 

Under  these  terms  of  the  franchise  which  secure  to  the  stock- 
holders honest  and  intelligent  management,  and  which  provide  for 
the  reversion  to  the  city  of  the  entire  property  of  the  company  with- 
out any  added  payment  therefor,  municipal  ownership  will  undoubt- 
edly occur  before  the  term  of  the  franchise  shall  have  expired. 

A  By-Product  Plant. 

This  plant  is  of  a  type  differing  from  most  of  the  gas  plants 
operating  in  the  United  States.  Aside  from  manufacturing  gas,  the 
company  operates  by-product  coke  ovens  as  well,  producing  during 
the  process  great  quantities  of  coke  and  supplies  of  pintsch  gas 


55 

(used  exclusively  for  lighting  railway  cars),  benzol,  cyanide,  etc. 
As  benzol  products  and  ammonia  are  essential  materials  for  the 
manufacture  of  munitions,  the  Government  has  taken  over  the 
benzol  and  ammonia  operations  absolutely  and  allows  no  toluol  or 
ammonia  to  be  shipped  from  the  plant  except  under  Government 
direction. 

The  profit  derived  from  the  by-products  enables  the  company  to 
sell  gas  at  a  price  lower  than  might  otherwise  be  possible.  Be- 
cause the  people  of  Indianapolis  used  an  unprecedented  amount  of 
gas  for  fuel  during  the  winter  of  1917,  the  company  was  compelled 
to  manufacture  water  gas,  the  added  expense  of  which  decreased 
their  ordinary  profits.  Yet  in  spite  of  increased  cost  of  operation, 
the  company  made  a  net  profit  last  year  of  $290,155.05. 

Extracts  From  the  Report  of  the  Citizens  Gas  Company  of  Indianapolis  for 

the  Year  Ending  December  31,  1917. 
Regarding   Public   Service,   Manufacturing  and   Cost  Details,   etc. 

"The  unusual  demand  for  gas  could  not  be  met  satisfactorily. 
Yet  in  spite  of  difficulties,  your  Company  supplied  the  people  of 
Indianapolis  with  14.5  per  cent  more  gas  in  1917  than  in  1916,  and 
also  delivered  to  the  people  of  Indianapolis  for  domestic  consump- 
tion 31.4  per  cent  more  coke  than  in  the  preceding  year.  Although 
our  record  for  the  trying  year  was  by  no  means  up  to  our  own 
desires,  it  is  certainly  true  that  the  people  of  Indianapolis  received 
no  such  increased  supply  of  any  other  important  commodities  re- 
quired by  them — and  at  no  increase  in  cost." 

"The  service  rendered  this  community  by  your  Company  as  a 
public  utility  may,  perhaps,  be  measured  by  the  saving  which  the 
gas  consumers  have  made  on  the  amount  of  gas  used  by  them 
during  the  past  eight  years  of  operation  by  your  Company.  During 
the  first  half  of  this  period,  your  Company  certainly  saved  the  peo- 
ple of  Indianapolis  30  cents  per  thousand  cubic  feet  on  all  gas  pur- 
chased from  the  two  gas  companies  which  were  then  in  existence, 
while  during  the  second  half  of  this  period,  there  has  been  a  saving 
of  35  cents  per  thousand  cubic  feet  on  all  gas  used. 

Savings  to  gas  consumers  (during  past  eight  years) $5,356,208 

Dividends  to  stockholders  (during  past  eight  years) 882,473 

Operating  Results. 

"It  has  been  a  matter  of  gratification  to  your  Directors  that  the 
Company  has  been  able  to  continue  to  supply  the  city  with  gas  at 
the  price  of  55  cents  per  thousand  cubic  feet  as  the  maximum — 
this  continuing  to  be  by  all  odds  THE  LOWEST  PRICE  IN  THE 
UNITED  STATES— and  it  is  their  hope  that  the  Company  will 
be  able  to  pass  through  the  vicissitudes  of  the  war  without  asking 
the  Public  Service  Commission  for  relief  in  the  matter  of  rates, 


56 

even  to  the  extent  of  returning  to  the  franchise  rate  of  60  cents  per 
thousand  cubic  feet." 

Comparative  Statistics. 

1917  1916  1915 

Coal  carbonized— tons 534,154  571,516  468,990 

Coke  produced— tons 410,771  443,916  350,153 

Gas  sent  out-cubic  feet 2,939,884,000  2,647,873,000  2,386,812,000 

Miles  of  gas  mains  in  use 624  616  587 

Number  of  meters  in  use 60,183  59,107  53,008 

Cost  of  coal  carbonized $2,149,117  $1,587,553  $1,225,833 

Payrolls    843,471  720,162  575,265 

Taxes    115,134  105,388  84,292 

Dividends  Paid 218,198  250,008  87,493 

Reserves  and  Surplus 1,010,276  807,481  486,534 

Enlargements. 

"Earnest  attention  has  been  given  to  the  problem1  of  increasing 
the  producing  capacity  of  your  plants,  and  enlargements  will  be 
made  as  soon  as  it  is  found  practicable  to  do  so.  In  view  of  the 
fact  that  material  enlargement  of  your  coke  ovens  will  involve  the 
gradual  replacement  of  certain  portions  of  the  plant  with  new  and 
larger  equipment,  your  Directors  have  deemed  it  wise  to  make 
heavier  appropriations  for  depreciation  reserves  than  would  other- 
wise have  been  considered  necessary.  The  increase  in  these  reserves 
since  1915  amounts  to  nearly  $300,000. 

REVENUE  STATEMENT 


Twelve  Months  Ending  December  31,  1917. 

Operating  Revenue 

Gas   $1,466,689.44 

Coke  2,458,224.79 

Ammonia    243,304.82 

Coal  tar 129,112.10 

Miscellaneous    663.67 


Operating  Expenses 

Manufacturing    $3,204,658.39 

Distribution    198,759.01 

Commercial    64,653.62 

Coke  and  by-products— Sales  expense 128,636.52 

General  (administration,  insurance,  legal,  etc.)        72,582.89 


Net  operating  revenue, 
Taxes  


Net  operating  income. 


$4,297,994.82 


$3,669,290.43 

$  628,70439 
115,134.60 

$   513,569.79 


57 

Non-Operating  Revenue 

Net  mercantile  earnings $  4,395.89 

Net  pintch  gas  earnings 7,854.83 

Net  benzol  earnings 227,349.08 

Net  cyanide  earnings 18,472.53 

Interest  and  discount 15,555.15 

Miscellaneous    1,528.89    $  275,156.37 


Total  net  revenue $   788,726.16 

Leasehold  rental  . .  376,892.50 


Net  earnings $  411,833.66 

Interest    121,678.61 


Net  profits $  290,155.05 

Dividends  Paid  January  1— December  31,  1917. 

March  27— Regular  semi-annual  dividend  No.  15  (5%) $62,500.00 

April  30— Special  dividend— Accruals  from  January  1,  1910  to  June 

30,  1911,  at  rate  of  10  per  cent  per  annum 80,698.03 

Sept.  27— Regular  semi-annual  dividend  No.  16   (5%) 75,000.00 


$218,198.03 
Dividend  Declared. 

"A  regular  semi-annual  dividend  (No.  17)  of  5  per  cent  has  been 
declared  out  of  the  earnings  to  December  31,  1917,  payable  March 
28th,  1918,  to  stockholders  of  record  at  the  close  of  business  March 
12,  1918. 

J.  D.  FORREST, 

Secretary  and  General  Manager. 
Indianapolis,  February  1,  1918." 

In  the  face  of  the  remarkable  success  of  this  company,  in  sup- 
plying a  high  quality  of  gas  at  rates  so  far  below  those  prevailing 
in  other  cities ;  and  in  the  face  of  the  insistant  demand  of  so  many 
gas  companies  for  an  increase  in  rates  in  opposition  to  franchise 
obligations  as  to  price  and  quality,  it  seems  highly  desirable  that  all 
public  officials,  including  courts  and  commissions,  who  will  be 
called  upon  to  decide  important  gas  cases,  should  know  these  facts. 
In  order  both  to  verify  to  any  readers  who  may  doubt  the  accuracy 
of  statements  made  herein,  and  to  enable  the  public  officials  who 
may  be  called  upon  to  decide  respecting  the  best  form  of  wording 
under  which  the  interests  of  the  public  may  be  best  safe-guarded, 
verbatim  quotations  from  the  franchise  of  the  Citizens  Gas  Com- 
pany of  Indianapolis  are  given  below. 


58 


EXTRACTS    FROM    FRANCHISE     OF    CITIZENS    GAS     COMPANY 
OF  INDIANAPOLIS. 

Capital  Stock. 

"(a)  The  capital  stock  shall  be  not  less  than  one  million  ($1,- 
000,000.00)  dollars,  to  be  divided  into  shares  of  twenty-five 
($25.00)  dollars  each. 

"(b)  No  increase  of  capital  stock  shall  be  made  except  it  be 
provided  that  each  new  stock  shall  be  submitted  to  the  public  at 
public  auction  upon  thirty  days'  notice  of  the  time  and  place  of  sale 
to  be  published  in  three  Indianapolis  newspapers  having  the  largest 
city  circulation,  at  which  time  said  stock  shall  be  sold  at  the  best 
price  obtainable  therefor  and  any  premium  offered  and  paid  for 
such  stock  shall  go  to  the  surplus  capital  of  said  company  and  shall 
bear  no  dividend. 

Publicity  of  Reports. 

"(c)  The  said  company  by  its  board  of  directors  shall  make  and 
publish  in  at  least  two  Indianapolis  newspapers  of  general  circu- 
lation, a  semi-annual  public  statement  in  detail  of  the  affairs  of  said 
company,  including  accounts  of  its  assets  and  liabilities,  disburse- 
ments and  receipts;  and  the  controller  of  said  city  shall  have  the 
right  to  investigate  the  books  of  said  company  at  any  time  for  the 
purpose  of  examining  into  the  correctness  of  said  report,  or  for 
other  purpose;  and  the  city  civil  engineer  shall  have  the  right  at 
any  time  to  make  examination  of  said  company's  plant  and  property. 

Trustees. 

"(d)  The  entire  capital  stock  of  the  corporation  shall  be  placed 
under  the  control  of  a  board  of  five  (5)  trustees  and  their  suc- 
cessors, who  shall  be  stockholders  in  said  company,  who  shall  be 
designated  in  said  articles  of  incorporation  and  one  of  whom  shall 
be  nominated  by  the  mayor  of  said  city;  which  said  board  of  trus- 
tees shall  have  full,  complete,  exclusive  and  irrevocable  power  dur- 
ing the  continuance  of  this  corporation,  to  hold  said  stock  and  vote 
the  same  as  fully  and  completely  as  if  they  were  the  owners  of  said 
capital  stock. 

Removal  of  Trustees. 

Any  member  of  the  board  of  trustees  may  be  removed  by  the 
Marion  circuit  court  upon  the  showing  that  said  trustee  is  an  em- 
ploye or  holder  of  any  of  the  securities  or  capital  stock  of  any  other 
company  organized  for  the  purpose  of  manufacturing  or  delivering 
gas  to  consumers  residing  in,  or  in  the  vicinity  of  the  city  of  Indi- 
anapolis, or  for  any  corrupt  practice  or  any  misconduct  which  said 
court  may  deem  detrimental  to  the  interests  of  said  company.  Re- 


59 

moval  from  the  city  of  Indianapolis  shall,  ipso  facto,  vacate  the 
office  of  any  trustee. 

Disposal  of  Earnings 

(f)  The  earnings  of  said  company  shall  be  used  in  the  follow- 
ing manner,  to-wit :  first,  to  the  payment  of  matured  debts  and  oper- 
ating expenses;  second,  to  the  payment  semi-annually  of  said  divi- 
dends of  ten  per  centum  per  annum  and  any  unpaid  accrued  divi- 
dends ;  third,  to  such  extensions  and  betterments  as  may  be  ordered 
by  the  board  of  public  works  of  said  city;  and  the  excess  to  the 
payment  in  whole  or  partial  payments  of  the  amounts  subscribed: 
Provided,  however,  That  when  any  part  of  the  amount  subscribed 
and  paid  in  by  any  certificate  holder  has  been  repaid  only  the  bal- 
ance unpaid  shall  thereafter  be  entitled  to  receive  such  dividend  of 
ten  per  centum  per  annum. 

Transfer  of  Property  to  City. 

(g)  When  said  certificate-holder  shall  have  received,  by  dividends 
or  otherwise,  upon  said  certificates  an  amount  equal  to  the  face 
value  thereof  together  with  interest  thereon  at  the  rate  of  ten  per 
centum  per  annum  payable  semi-annually,  then  said  certificates 
issued  to  said  subscribers  shall  be  deemed  fully  paid  and  cancelled 
and  it  shall  be  the  duty  of  the  trustees  and  directors  of  said  com- 
pany to  convey  said  gas  plant  and  property  belonging  to  said  com- 
pany to  said  city,  to  be  owned  and  operated  or  leased  by  it,  and  all 
the  rights,  title  and  interest  of  said  company  or  its  certificate- 
holders,  stockholders,  officers,  directors  or  trustees,  shall  be  deemed 
to  be  fully  paid  and  extinguished,  and  all  such  certificates,  whether 
of  stock  or  otherwise,  shall  be  surrendered  and  cancelled  and  said 
corporation  shall  be  wound  up. 

531.  Bond  of  Indemnity. 

4.  Before  said  parties  of  the  second  part  or  their  assigns  shall 
enter  upon  or  take  possession  of  any  street,  alley,  avenue  or  other 
public  place  within  said  city  for  said  purposes  aforesaid,  they  or 
their  assigns  shall  execute  to  said  city  of  Indianapolis  a  good  and 
sufficient  bond  to  be  maintained  throughout  the  term  of  this  fran- 
chise, in  the  sum  of  twenty-five  thousand  ($25,000)  dollars,  with 
surety  to  the  approval  of  said  board  of  public  works,  and  condi- 
tioned for  the  indemnification  of  said  city  against  all  loss  by  reason 
of  damages  sustained  by  any  person,  form  or  corporation  by  reason 
of  the  construction  or  operation  of  said  gas  plant  by  the  said 
parties  of  the  second  part . . . 


60 


538.  Materials,  Quality. 

11.  All  materials  used  in  the  equipment  or  construction  of  said 
plant  shall  be  of  the  best  quality  and  the  mains  of  said  company 
shall  at  all  times  be  of  sufficient  size  to  render  adequate  service . . . 

540.  Quality  of  Gas. 

13.  The  parties  of  the  second  part.  ..agree  that  the  gas  so  to 
be  furnished,  sold  and  distributed  shall  have  at  least  six  hundred 
(600)  British  thermal  units  per  cubic  foot,  measured  according  to 
standard  methods  employed  for  such  purposes. 

541.  Price  of  Gas. 

14.  The  parties  of  the  second  part  and  assigns  further  agree 
that  the  price  to  be  charged  the  consumer  for  gas  so  to  be  fur- 
nished under  this  contract  shall  never  at  any  time  exceed  the  sum 
of  sixty  (60)  cents  per  thousand  cubic  feet,  and  in  the  event  the 
said  parties  of  the  second  part  or  their  assigns  shall  ever  increase 
its  rates  for  gas  in  excess  of  sixty  (60)   cents  per  one  thousand 
(1,000)  cubic  feet,  aforesaid,  for  gas  furnished  under  terms  of  this 
contract,  then  and  in  that  event  all  the  rights,  privileges  and  fran- 
chises herein  granted  shall  at  once  become  null  and  void  and  its 
rights  to  longer  occupy  or  use  any  of  the  streets,  alleys,  avenues, 
public  places  or  other  parts  of  said  city  may  be  terminated,  and 
the  city  shall  have  the  right  to  acquire  said  plant  as  herein  pro- 
vided as  upon  the  termination  of  the  franchise  period. 

544.  Extension  of  Lines — Forfeiture. 

17.  The  parties  of  the  second  part  hereby  bind  themselves,  their 
successors  and  assigns,  to  so  extend  the  various  lines  and  mains  of 
said  plant  that  all  the  inhabitants  of  said  city  may  be  supplied  with 
gas  for  fuel  and  lighting  purposes,  when  they  may  reasonably  re- 
quire the  same  and  when  a  petition  therefor  has  been  presented  to 
the  board  of  public  works. . .  (details  omitted  here). 

547.  Test  of  Meters. 
547.  Test  of  Meters,  Forfeiture  on  Failure  to  Furnish  Gas. 

20.  Said  board  of  public  works  shall  at  all  times  have  authority 
to  inspect  or  cause  to  be  inspected  and  to  test  or  cause  to  be  tested 
any  meters  in  use  by  the  parties  of  the  second  part  or  assigns,  or  to 
inspect  and  test  the  apparatus,  mains  or  plant  of  said  company,  and  to 
test  or  caused  to  be  tested  the  quality  of  the  gas  and  the  calorific 
and  illuminating  value  of  the  same  for  the  purpose  of  determining 


61 

whether  the  same  does  comply  with  the  terms  and  provisions  there- 
of. And  (any)  unsafe  apparatus  or  imperfect  meters  shall  be  im- 
mediately replaced  upon  order  of  said  board  of  public  works. 
. .  .and  the  gas  shall  be  made  to  conform  to  the  standard  herein 
fixed,  and  if  said  company  shall  fail  to  make  its  gas  of  the  standard 
and  quality  herein  fixed  within  a  period  of  five  days  after  such 
order,  it  shall  forfeit  to  said  city  the  sum  of  one  hundred  ($100.00) 
dollars  for  each  day's  failure  to  comply  with  such  order,  and  in  ad- 
dition to  the  above  penalty  the  city  shall  have  the  right  by  any 
proper  action  at  law  or  equity,  to  compel  said  company  to  furnish 
gas  of  the  quality  herein  prescribed. 


CHAPTER  IX. 

THE  FIGHT  FOR  MUNICIPAL  GAS  IN  KALAMAZOO  WITH  AN  IN- 

VESTIGATION  OF  COSTS  AND   PROFITS,   BY  THE  WORLD'S 

GREATEST  GAS  EXPERT,  WILLIAM  NEWBIGGING. 

All  of  the  public  utilities  of  Kalamazoo,  Michigan,  with  the  ex- 
ception of  the  electric  lighting  of  the  streets  and  the  operation  of 
the  public  water  plant  are  under  the  control  of  a  single  monopoly 
directed  from  14  Wall  Street,  New  York  City,  which  corporation 
also  controls  the  public  utilities  of  many  of  the  other  cities  of 
Michigan  as  well  as  those  of  other  states.  In  order  to  hide  the  real 
identity  of  this  great  controlling  force  in  its  various  ramifications, 
and  to  evade  the  spirit  if  not  the  letter  of  the  law,  frequent  changes 
of  names  and  of  organizations  have  been  resorted  to.  The  struggle 
on  the  part  of  the  citizens  to  free  the  city  from  the  tentacles  of  this 
octopus  grown  greedy  through  its  profits  has  been  long  and  hard 
fought,  and  the  end  is  not  yet.  But  the  rapid  growth  of  public 
sentiment  in  favor  of  municipal  ownership  of  public  utilities  lends 
encouragement  to  those  who  have  worked  for  its  accomplishment. 

At  the  present  time,  1918,  consumers  pay  their  bills  for  elec- 
tricity to  the  "Michigan  Light  Company/'  and  for  gas  to  the  "Con- 
sumers Power  Company,"  both  of  which  companies  use  the  same 
office  and  clerical  force.  Although  the  streets  of  Kalamazoo  and 
the  public  buildings  are  lighted  by  a  highly  efficient  municipally 
owned  electric  plant,  commercial  electricity  and  power  to  operate 
the  street  railways  are  obtained  from  this  private  corporation. 

About  ten  years  ago  when  the  franchise  of  the  Gas  Company 
had  yet  ten  years  to  run,  the  company  applied  for  a  new  franchise, 
promising  better  service  at  reduced  rates.  However,  when  it  be- 
came known  that  certain  terms  of  the  proposed  new  franchise  were 
highly  unjust,  a  citizen's  league  was  formed  to  defeat  not  only  this 
franchise  but  all  future  franchises  which  would  extend  to  a  private 
corporation  the  monopoly  of  any  public  utility.  As  a  result,  the 
proposition  to  grant  a  new  franchise  was  overwhelmingly  defeated. 

Some  time  after  this,  an  attempt  was  made  to  obtain  a  franchise 
granting  further  rights  in  the  streets  for  laying  of  pipes,  etc.,  pre- 
sumably for  the  purpose  of  heating  buildings  by  steam.  It  was  ad- 
vertised that  this  movement  was  promoted  bv  parties  opposed  to  the 
Gas  Company  and  in  competition  with  them,  but  the  truth  leaked  out 
that  the  Gas  Company  itself  fathered  this  movement.  Certain  citi- 
zens became  so  incensed  at  this  dishonest  method  of  defeating  jus- 
tice that  they  formed  the  Kalamazoo  Municipal  Ownership  League 
that  forced  the  matter  to  an  election  in  which  all  hopes  of  the 


63 

Gas  Company  to  extend  its  franchise  were  frustrated,  and  a  move- 
ment was  set  on  foot  to  erect  a  municipally  owned  gas  plant. 

The  spring  of  1915  saw  this  fight  for  municipal  ownership  wax 
to  a  white  heat.  Both  sides  bent  every  energy  to  win.  The  Kala- 
mazoo  Gas  Company  retained  nine  lawyers  to  aid  in  planning  the 
campaign,  writing  editorials,  and  working  other  schemes  to  defeat 
municipal  ownership.  They  were  aided  by  a  national  association 
which  is  a  combination  of  all  the  electric,  gas,  street  railway,  tele- 
phone, telegraph  and  other  public  utility  companies,  to  form  a  unit 
and  work  together  to  defeat  public  ownership,  either  national  or 
municipal,  wherever  the  attempt  is  made.  In  this  campaign  they 
sent  one  or  more  lawyers  from  New  York  as  well  as  from  other 
large  cities.  They  violently  assailed  in  the  most  malicious  and 
mean  manner  every  newspaper  and  every  person  who  took  an  active 
interest  in  public  ownership. 

The  City  of  Kalamazoo,  upon  the  recommendation  of  the  author 
of  this  work,  who  at  that  time  was  president  of  the  Municipal 
Ownership  League,  sent  to  Manchester,  England,  for  the  world's 
greatest  gas  expert  to  ascertain  the  facts  which  the  company  had 
refused  to  give  to  the  public  relative  to  the  gas  plant  and  its  opera- 
tion in  Kalamazoo.  This  expert  was  Mr.  William  Newbigging,  a 
man  of  life-long  association  with  the  gas  industry.  For  34  years 
he  had  been  associated  with  his  father,  Mr.  Thomas  Newbigging, 
author  of  the  "Handbook  for  Gas  Engineers  and  Managers,"  edi- 
tor of  "King's  Treatise  on  Coal  Gas,"  ex-president  of  the  British 
Gas  Institution,  and  an  acknowledged  leading  engineer.  His 
brother,  Mr.  John  G.  Newbigging,  Chief  Engineer  of  the  Man- 
chester Corporation  Gas  Undertaking,  also  ranked  as  a  leading 
municipal  engineer. 

Concerning  his  own  experience,  Mr.  William  Newbigging  wrote 
as  follows: 

"Most  of  my  work  has  been  done  for  local  authorities  owning 
gas  works,  but  I  am  also  chief  engineer  of  the  Dublin  Gas  Com- 
pany in  addition  to  my  municipal  appointments. 

"I  acted  as  advising  gas  engineer  to  the  National  Civic  Federa- 
tion when  they  visited  Britain  as  you  would  gather  from  a  perusal 
of  the  Reports  issued  by  the  body. 

"I  constructed  the  Government  gasworks  in  Tokio,  Japan,  and 
I  have  visited  the  United  States  with  a  view  to  familiarizing  my- 
self with  the  conditions  of  gas  supply  there. 

"I  have  constructed  Works  in  all  parts  of  the  world. 

"I  am  joint  author  with  the  late  Mr.  Thomas  Newbigging  of  a 
book  on  the  "Valuation  of  Gasworks  for  Rating  or  Assessment 
Purposes,"  and  I  have  been  largely  engaged  in  the  valuation  of 
Gas  Undertakings  when  purchased  by  local  authorities." 

Mr.  Newbigging  left  England  January  9,  1915,  and  upon  his 
arrival  in  Kalamazoo  made  a  thorough  examination  of  the  gas  plant 
and  its  properties.  At  the  request  of  the  city's  authorities,  he  was 


64 

allowed  to  inspect  such  of  the  company's  books  as  were  in  Kala- 
mazoo.  Shortly  after  his  return  to  England,  Mr.  Newbigging  sent 
to  the  city's  authorities  an  official  report  of  his  findings  and  con- 
clusions. This  report  is  most  valuable  as  it  stands  as  the  testimony 
of  one  whom  the  world  has  been  pleased  to  honor  with  confidence 
and  responsibility. 

Armed  with  the  testimony  of  this  man  who  was  known  widely 
in  three  continents,  the  Municipal  Ownership  League  again  took 
up  the  fight.  But  the  lavish  expenditure  of  money  on  the  part  of 
the  gas  company  so  influenced  public  opinion  through  the  press 
and  widespread  misrepresentation  of  facts  by  means  of  cunningly- 
worded  literature,  that  the  vote  for  a  municipally  owned  gas  plant, 
taken  September  7,  1915,  was  lost,  the  law  requiring  a  favorable 
three-fifths  vote  of  all  ballots  cast  at  the  election.  However,  since 
so  large  a  number  of  voters  expressed  themselves  at  the  polls  as 
being  in  favor  of  public  ownership,  the  feeling  was  general  that 
the  vote  would  have  carried  had  it  not  been  for  the  underhanded 
propaganda  of  the  utility  company. 

Since  then  the  sentiment  in  favor  of  municipal  ownership  has 
grown  so  rapidly  that  early  in  1918  the  people  incorporated  their 
wishes  in  the  new  City  Charter1  which  is  universally  recognized 
as  a  model  of  its  kind.  By  the  terms  of  this  charter  no  exclusive 
grants  are  permitted.  No  franchise  can  be  granted  and  be  of  force 
without  a  vote  of  the  people  thereon.  Full  supervision  of  public 
utilities  is  provided  for,  and  every  possible  safeguard  used  to  pro- 
tect the  city's  interests.  The  right  is  reserved  to  the  city  to  pur- 
chase or  condemn  the  franchises  and  property  of  public  utilities 
at  any  time. 

Interesting  and  enlightening  facts  were  revealed  as  a  result  of 
the  examination  of  the  company's  books  by  Mr.  Newbigging.  It 
was  shown  that  eight  directors  resident  in  Kalamazoo,  who  were 
simplv  "dummies"  to  hold  meetings  and  vote  as  dictated  by  the 
New  York  financiers,  were  allowed  $40  apiece  at  each  meeting  they 
attended  in  their  own  city,  and  the  charge  for  this  was  made  against 
operating  expenses.  This  was  but  one  item  of  what  it  "cost"  to 
"produce  gas." 

The  company  also  insisted  that  they  be  allowed  to  enter  a  price 
for  coal  which  was  higher  than  that  actually  paid  by  them,  claiming 
that  the  city  could  not  buy  as  cheaply.  Such  an  allowance  would 
add  to  the  "cost  of  operation."  It  should  be  noted  that  Mr.  New- 
bigging formed  his  estimates  on  the  figures  which  he  found  in  the 
books  of  the  company,  so  that  if  such  fictitious  and  unnecessary 
charges  had  been  eliminated  before  he  arrived  at  his  estimate,  and 
if  the  company  had  been  honestly  financed,  the  cost  of  gas  could 
not  have  exceeded  50  cents  and  unquestionably  would  have  been 
less. 

1.  The  provisions  respecting  public  utilities,  franchises,  etc.,  as  adopted  in  this  char- 
ter will  be  found  printed  elsewhere  in  this  work. 


65 


75  Cents  a  Reasonable  Maximum  Charge. 

It  will  be  seen  from  the  Newbigging  Report  which  follows  that 
after  allowing  all  expenses  as  claimed  by  the  company,  a  munici- 
pally-owned plant  could  furnish  the  highest  quality  of  gas  to 
consumers  at  70.57  cents  per  1,000  cubic  feetf  and  at  the  same 
time  yield  a  profit  sufficient  to  provide  for  the  payment  of  a  new 
plant  within  twenty  years,  the  expense  items  to  include  not  only  the 
original  cost  of  the  plant  but  also  depreciation,  interest,  etc.,  in  the 
intervening  years,  so  that  at  the  end  of  the  period  the  city  would 
own  the  plant  free  of  debt. 

Mr.  Newbigging,  being  highly  conservative  by  nature,  and 
wishing  to  allow  for  all  possible  contingencies,  added  a  margin  to 
his  estimate  of  70.51  cents,  and  gave  as  his  opinion  that  75  cents 
per  1,000  cubic  feet  would  be  a  reasonable  rate  at  which  gas  should 
be  sold  in  Kalamazoo  in  order  to  include  all  possible  cost  of  opera- 
tion, maintenance,  depreciation,  interest,  etc.  so  that  at  the  expira- 
tion of  twenty  years  when  the  last  bonds  should  have  been  retired, 
the  plant  should  not  fail  to  have  been  fully  paid  for  and  maintained 
in  perfect  condition  out  of  the  profits  realized. 

In  order  that  other  cities  may  have  the  benefit  of  the  investi- 
gations and  counsel  of  Mr.  Newbigging  also,  his  report  follows : 

REPORT  BY  WILLIAM  NEWBIGGING 

ON  THE  GAS  SUPPLY  OF  THE  CITY  OF  KALAMAZOO,  MICHIGAN, 
AND  ON  THE  PROPOSAL  TO  ESTABLISH  A     MUNICIPAL 
PLANT  MARCH  8,  1915. 

To  the  Honorable  Mayor  and  Common  Council  of  the  City  of  Kala- 
mazoo. 

Gentlemen : — 

Agreeably  to  your  instructions  received  by  cable  from  your  City 
Attorney,  Mr.  Schaberg,  I  visited  Kalamazoo,  inspected  the  works 
of  the  Gas  Company  and  the  district  of  gas  supply,  examined  the 
accounts  of  the  Company,  and  have  given  careful  consideration  to 
the  gas  question  generally. 

I  wish  here  to  accord  my  appreciation  of  the  able  assistance 
rendered  to  me  by  the  officials  of  the  city,  and  also  the  fact  that 
the  officials  of  the  Company  answered  all  my  queries  without  re- 
serve and  permitted  me  to  make  a  thorough  examination  of  the 
property  and  records  of  the  Company. 

Since  my  return  to  England  I  have  made  an  exhaustive  survey 
of  the  particulars  obtained  during  my  visit  to  Kalamazoo. 

As  you  are  aware  the  franchise  granted  to  the  Kalamazoo  Gas 
Light  Company  in  1894  will  expire  next  year  and  the  question 
which  now  confronts  the  City  Council  is  whether  a  new  franchise 
should  be  granted  to  the  Company,  and  if  so,  on  what  terms ;  or  on 


66 

the  other  hand,  whether  the  city  should  municipalize  the  gas  under- 
taking. 

In  order  not  to  complicate  this  report  I  have  kept  the  general 
description  of  the  works  separate  from  the  report. 

A  plan  showing  the  lay-out  of  the  works  and  plant,  and  a  map 
of  the  city  with  the  main  pipes  marked  thereon,  also  accompany 
the  report. 

Under  the  original  franchise  the  Company  were  empowered  to 
charge  the  following  rates  per  1,000  cubic  feet  of  gas  supplied; 

When  the  monthly  consumption  is 

Between  200  cu.  ft.  and  5,000  cu.  ft $125 

Between  5,000  cu.  ft.  and  10,000  cu.  ft 1.15 

10,000  cu.  ft  and  over 1.00 

When  the  monthly  consumption  is  200  cu.  ft.  or  less  a  flat  rate 
of  25  cents  to  be  charged. 

Ten  per  cent  had  to  be  deducted  from  these  rates  when  the 
total  annual  consumption  of  gas  reached  50,000  million  cu.  ft. 

This  consumption  was  reached  in  1901,  and  the  new  scale  of 
charges  came  into  operation  in  July  of  that  year. 

The  new  scale  of  maximum  rates  under  the  franchise  is  as 
follows : 

Between  200  cu.  ft.  and  5,000  cu.  ft $1.12 

Between  5,000  cu.  ft.  and  10,000  cu.  ft 1.03 

10,000  cu.  ft.  and  over 90 

The  Company  actually  charge — 

Between  200  cu.  ft.  and  5,000  cu.  ft $1.12 

Between  5,000  cu.  ft.  and  10,000  cu.  ft 1.00 

10,000  cu.  ft.  and  over 90 

It  will  seem  therefore,  that  the  Company  are  not  enforcing  to  the 
full  their  powers  in  the  matter  of  the  rate  per  1,000  cubic  feet.* 

The  quantity  of  gas  made  during  the  year  ending  December 
1914,  amounted  to  288,097,700  cubic  feet. 

The  total  sale  of  gas,  including  that  used  by  the  Company, 
amounted  to  272,673,000  cubic  feet. 

The  difference  between  these  two  quantities,  i.  e.,  15,424,700 
cubic  feet,  represent  the  gas  loss  or  unaccounted  for,  and  is  equal 
to  5.35  per  cent  of  the  output. 

In  common  with  many  other  gas  undertakings  in  the  United 
States,  the  growth  of  this  undertaking  has  been  considerable.  The 
consumption  of  gas  in  1914  shows  a  reduction  of  11,806,200  below 
the  consumption  of  1913,  but  this  decrease,  in  my  opinion,  is  only 
temporary. 

*  Mr.  Newbigging  was  not  informed  of  the  fact  that  when  the  company  was  com- 
pelled under  the  franchise  to  reduce  its  rates,  it  evaded  the  intent  of  the  franchise  by 
reducing  the  quality  to  a  greater  degree  than  the  price,  BO  that  its  rate  of  profit  was  in- 
creased rather  than  diminished. 


67 

The  sales  of  gas  during  the  last  fourteen  years  has  been  as 
follows : 

Year  Cubic  Feet 

1900    49,635,300 

1901  62,139,400 

1902    79,473,900 

1903    103,071,100 

1904    124,261,200 

1905    153,663,700 

1906 186,113,400 

1907 210,090,600 

1908    212,199.700 

1909 234,330,600 

1910 250,940,500 

1911    259,314,000 

1912    281,581,000 

1913 284,479,200 

1914   272,673,000 

Physical  Value. 

An  inventory  of  the  plant  is  given  as  an  appendix  to  this  report 
and  deducting  the  figure  of  value  from  my  structural  valuation,  I 
arrive  at  the  conclusion  that  the  physical  value  of  the  works  and 
plant  at  the  31st  December,  1914,  was  $945,893. 

Receipts  and  Expenditures. 

In  submitting  the  figures  of  the  receipts  and  expenditures  of 
the  Company,  I  have  taken  the  year  ending  31st  December,  1914, 
as  a  basis.  These  show  the  latest  results,  and  the  Company  is 
entitled  to  the  benefit,  if  any,  arising  therefrom,  as  a  matter  of 
fact,  however,  there  would  not  have  been  any  substantial  difference 
if  I  had  taken  the  average  of  the  last  three  years. 

The  results  are  worked  out,  as  is  usual,  on  the  basis  of  cost  per 
1,000  cubic  feet  of  gas  sold — not  on  the  gas  made. 

Gross  Earnings. 

The  total  earnings  of  the  Company  for  the  year  under  review 
amounted  to  141.22  cents  per  1,000  cubic  feet  sold,  made  up  as 
follows : 

Gas  Sales  101.15  cents 

Residuals 37.58  cents 

Non-operating   revenues    2.49  cents 

Total    . 141.22  cents 


68 


Gross   Earnings   Less   Operating   Expenses. 

The  operating  expenses,  which  include  manufacture,  distribu- 
tion, utilization,  commercial  and  miscellaneous  charges,  during  this 
period  amounted  to  75.11  cents  per  1,000  cubic  feet  sold. 

Per  1,000  cu.  ft. 

Gross  earnings  141.22  cents 

Operating  expenses    75.11  cents 


Net  earnings  66.1 1  cents 

The  net  earnings  of  the  Company  per  1,000  cubic  feet  are,  there- 
fore, 66.11  cents,  out  of  which  are  to  be  paid  the  interest  on  the 
funded  debt,  interest  on  the  floating  debt,  and  taxes. 

The  total  revenue  received  from  the  sale  of  gas  amounted  to 
$275,820.75,  and  this  is  equal  to  an  average  rate  of  101.15  cents 
per  1,000  cubic  feet. 

The  total  quantity  of  gas  sold  is  divided  as  follows; 

Domestic   and    illuminating    purposes    244,857,600 

Industrial   purposes    17,203,400 

Hotels  and  restaurants 10,612,000 


272,673,000 

The  gross  cost  of  gas  into  holder  amounts  to  53.02  cents  per 
1,000  cubic  feet,  made  up  as  follows: 

Cubic  Feet 

Work    superintendence    1.86  cents 

Retort  house  labor  7.94  cents 

Purifier  house  labor  37  cents 

Miscellaneous  labor   50  cents 

Bench  fuel  5.16  cents 

Coal  carbonized  32.34  cents 

Enricher 07  cents 

Purification  material 32  cents 

Steam    2.06  cents 

Retort  house  and  works  supplies  53  cents 

Repairs    1.87  cents 

53.02  cents 

The  income  received  from  residuals  amounted  to  35.56  cents 
per  1,000  cubic  feet,  made  up  as  follows: 

Coke  27.53  cents 

Tar  4.15  cents 

Ammonia   3.83  cents 

Carbon 05  cents 

35.56  cents 


69 


Net  Cost  of  Gas  Into  Holder. 

Gross  cost  of  gas  into  holder  53.02  cents 

Less  residuals  35.56  cents 


17.46  cents 

or,  calculated  on  the  gas  it  is  equal  to  18.44  cents  per  1,000  cubic 
feet. 

The  Company  have  a  carburetted  water  gas  plant,  particulars 
of  which  I  gave  in  the  inventory,  but  this  plant  has  not  been  in 
operation  since  1912. 

The  reason  for  this  is  that  it  does  not  pay  the  Company  to 
manufacture  carburetted  water  gas  with  oil  at  present  prices.  The 
plant  is,  however,  indispensable  for  the  purpose  of  meeting  the  de- 
mand for  gas  when  there  is  a  shortage  of  coal  due  to  labor  troubles 
and  other  causes. 

Distribution. 

The  distributing  system  comprises  about  83  miles  of  main  pipes, 
and  these  range  in  size  from  under  2  in.  to  20  in.  in  diameter.  The 
length  of  main  under  2  in.  in  diameter  is  3,294  feet. 

The  Company,  at  my  request,  opened  the  ground  in  several 
places  along  the  line  of  main,  to  admit  of  an  inspection  of  the 
pipes.  The  mains  were  found  to  be  in  a  satisfactory  condition. 
The  leakage,  or  unaccounted  for  gas,  is  low. 

The  number  of  consumers  on  the  31st  December,  1914,  was 
9,415  and  the  meters  in  use  9,438. 

The  cost  of  distributing  the  gas  amounts  to  3.84  cents  per  1,000 
cubic  feet  sold,  made  up  as  follows: 

Distribution   superintendence    39  cents 

Operating   labor    75  cents 

Re-setting  and  removing  meters    50  cents 

Distribution  system  expense  41  cents 

Repairs   of    mains    22  cents 

Repairs  of  services   40  cents 

Repairs  of  meters  1.17  cents 


3.84  cents 
Utilization   and    Commercial    Expense. 

The  utilization  and  commercial  charges  amount  to  7.67  cents 
per  1,000  cubic  feet  sold,  made  up  as  follows: 

Commercial  arc  expense   03  cents 

Consumers  premises  expenses   55  cents 

Loaned   appliance    expense    07  cents 

Salaries  of  meter  indexers 59  cents 

Salaries  and  expense  of  com'l  office  clerks  2.13  cents 

Salaries  and  com.  of  collection  bureau 1.23  cents 

Commercial  office  rent   32  cents 

Commercial  office  supplies  and  expenses 41  cents 

Sales   department   expense    2.34  cents 


Total    7.67  cents 


70 


General  and  Miscellaneous  Expenses. 

The  general  and  miscellaneous  charges  during  the  period  under 
review  amounted  to  7.56  cents  per  1,000  cubic  feet,  made  up  as 
follows : 

Salaries  and  expenses  of  general  offices    4.54  cents 

Salaries  and  expenses  of  gen.  office  clerks 1.16  cents 

General  office  rents 32  cents 

General  office  supplies  and  expenses 17  cents 

Printing  and  stationery   14  cents 

Law  expenses-general   02  cents 

Injuries  and  damages 26  cents 

Insurance   13  cents 

Miscellaneous  general  expense   44  cents 

Store's  expense 05  cents 

Uncollectable  bills  33  cents 

7.56  cents 
Operating  Expenses. 

The  following  table  summarizes  the  manufacture,  distribution, 
utilization,  commercial,  general  and  miscellaneous  expenses  in- 
curred per  1,000  cubic  feet  sold: 

Manufacture    18.44  cents 

Distribution   3.84  cents 

Utilization  and  commercial 7.67  cents 

Miscellaneous   and    general    , 7.56  cents 

Total  operating  expenses 37.51  cents 

I  am  of  the  opinion  that  this  figure  of  37.51  cents,  representing 
the  total  net  cost  of  supplying  gas  to  the  consumers,  is,  in  the  aggre- 
gate, a  reasonable  cost  for  the  company  to  incur. 

Capital  Charges. 

The  following  table  shows  the  assets  and  liabilities  of  the  Com- 
pany at  the  31st  December,  1914. 

Assets. 

Plant  and  investment  $1,261,185.48 

Park  Club  stock 1.00 

G.  A.  R.  Building  Assn.  stock 1.00 

Michigan  Light  Co.  deposit  account  $65,659.88 

Cash  in  bank  39,925.81 

Cash  in  hand 600.00 

Accounts  receivable — gas  29,435.56 

Accounts  receivable — inter  company 1,754.42 

Accounts  receivable — merchandise   5,760.57 

Accounts  receivable — residuals  7,891.56 

Accounts  receivable — miscellaneous   32.17 

Material  stock  account  46,215.66 

$194,275.63 


71 

Expenses  paid  in  advance $          72.47 

Municipal  regulation  deposit  250.00 

Salvage  account  1,690.00 


Total   $1,457,475.58 

Liabilities. 

Capital  stock-  common $300,000.00 

Bonds  due  1920,  interest  at  5  per  cent 400,000.00 

Recovery  account 1,690.00 

Bills    payable    $469,500.00 

Accounts  payable    13,921.11 

Bills  paid  twice  and  over  paid 42.83 

Consumers'  deposits  8,469.95 

Deferred  payments    2,173.90     $494,107.79 

Accrued  accounts    27,172.85 

Adjustment  account 8,168.57 

Contingent  reserve  account 56,821.78 

Surplus— old  account  53,582.59 

Total    surplus— current    account    $1 15,932.00    1 15,932.00 


Total     $1,457,475.58 

The  interest  charges  on  the  capital  stock  invested  in  the  under- 
taking, exclusive  of  the  common  stock,  but  including  taxes,  per 
1,000  cubic  feet  gas  sold,  I  find  to  be  as  follows: 

Interest  on  funded  debt  7.33  cents 

Interest  on  floating  debt 11.65  cents 

Taxes    4.60  cents 


Total 23.58  cents 

The  interest  payable  on  the  funded  debt  is  at  the  rate  of  5  per 
cent  and  the  interest  on  the  floating  debt  varies  from  6  to  7  per  cent. 

The  interest  on  the  debt,  viz.,  23.58  cents,  deducted  from  the  net 
earnings  of  the  Company,  i.  e.,  66.11,  leaves  a  sum  of  42.53  cents 
per  1,000  cubic  feet  sold  as  the  net  profit;  and  this  is  equal  to  38.64 
per  cent  on  the  common  stock  of  the  Company. 

Rate  at  Which  Company  Should  Supply  Gas  Under  New  Franchise,  if  Such 

Be  Granted. 

In  order  to  ascertain  the  rate  at  which  gas  should  be  supplied 
under  a  new  franchise,  I  have  assumed  that  8  per  cent,  is  a  reason- 
able return  on  the  common  stock  of  the  Company. 

The  total  charges  per  1,000  cubic  feet  for  interest  would  then  be 
as  follows : 

Interest  on  common  stock  at  8  per  cent 8.80  cents 

Interest  on  funded  debt  7.33  cents 

Interest  on  floating  debt 11.65  cents 

Taxes    4.60  cents 

Total  charges  for  interest  and  taxes  32.38  cents 


72 

Adding  to  this  figure  of  32.38  cents,  the  total  operating  expenses 
i.  e.,  37.51  cents,  I  arrive  at  a  total  cost  of  69.89  cents. 

It  is  only  fair  that  a  margin  should  be  allowed  on  this  figure 
in  order  to  meet  any  contingencies  that  may  arise  and  I  therefore 
add  5.11  cents,  making  a  total  of  75  cents  per  1,000  cubic  feet. 

The  figure  of  75  cents  is  a  fair  rate  at  which  the  Company 
should  supply  gas  in  the  event  of  a  new  franchise  being  granted  to 
them. 

Proposed  Municipal  Plant. 

I  will  now  deal  with  the  cost  to  the  municipality  of  building 
and  equipping  a  plant  to  meet  the  requirements  of  the  city. 

The  make  of  gas  for  the  year  ending  December,  1914,  was  288,- 
097,000  cubic  feet. 

A  new  works  should  be  designed  with  a  view  to  easy  extension 
in  the  future. 

I  consider  that  it  would  not  be  wise  to  put  down  a  works  of  a 
less  capacity  than  350  million  cubic  feet  per  annum. 

With  such  a  works,  designed  in  accordance  with  modern  practice, 
it  would  be  possible  to  manufacture  gas  at  a  less  figure  than  the 
Company  are  capable  of  doing  with  the  existing  works. 

The  cost  of  providing  such  a  works  and  distributing  plant,  and 
including  land,  I  estimate  to  be  $975,000. 

It  would  not  be  policy,  however,  for  the  city  to  provide  a  new 
gas  works  and  new  distributing  plant,  inasmuch  as  in  the  event  of 
the  transfer  of  the  undertaking  to  the  city,  the  existing  works  and 
plant  could  be  modernized  where  necessary. 

The  question,  therefore,  resolves  itself  into  the  terms  on  which 
the  city  could  acquire  the  undertaking  from  the  Company. 

The  purchase  price  would  be  settled  either  by  agreement  or  by 
arbitration,  and  assuming,  in  the  event  of  failure  to  agree,  the 
Court  decided  that  a  fair  basis  would  be  the  repayment  of  the 
capital  invested  in  the  undertaking,  the  position  would  be  as  follows : 

Common    stock    $300,000 

Bonds     400,00 

Floating   debt    469,500 

Consumer's  deposits 8,469 

$1,177,969 

Assuming  that  the  Company  were  willing  to  sell  and  the  Coun- 
cil agreeable  to  purchase  on  this  basis  I  have  calculated  the  rate  at 
which  the  city  could  supply  gas,  assuming  that  no  profit  were 
made  and  the  purchase  money  were  realized  by  a  4^2  per  cent,  loan 
redeemable  in  20  years. 

The  interest  and  sinking  fund  charges  on,  say,  $1,200,000  amount 
to  33  cents  per  1,000  cubic  feet. 

This  figure  is  based  on  the  sale  of  gas  for  the  year  ending 
December,  1914. 


73 

To  this  figure  of  33  cents  must  be  added  the  operating  expenses, 
and  I  assume  these  to  be  the  same  as  those  incurred  by  the  Com- 
pany, viz.,  37.51  cents. 

Adding  these  figures  together  and  allowing  a  margin  for  con- 
tingencies, I  arrive  at  the  figure  of  75  cents,  the  rate  at  which  the 
city  could  supply  gas. 

It  will  be  apparent  that  whether  the  concession  of  the  Company 
be  renewed,  or  the  undertaking  be  transferred  to  the  city,  a  rate  of 
75  cents  is  sufficient  either  to  remunerate  adequately  the  company, 
or,  on  the  other  hand,  to  meet  the  expenses  of  the  undertaking  on 
a  municipal  basis. 

Moreover,  it  must  be  remembered  that  the  city  would,  by  means 
of  the  sinking  fund,  be  reducing  the  capital  debt  on  the  undertaking 
year  by  year,  until,  at  the  end  of  twenty  years,  it  would  be  free 
from  the  original  debt. 

The  principal  argument  against  municipalization  of  gas  under- 
takings in  the  United  States  is  that  the  service  in  the  hands  of  the 
municipality  would  not  be  as  efficient  as  it  is  in  the  hands  of  a  com- 
pany. Another  argument  is  in  regard  to  the  difficulty  in  securing 
the  services  of  competent  men  to  take  charge  as  general  managers 
and  as  engineers. 

The  first  argument  is  one  on  which  the  Council  and  citizens  gen- 
erally are  more  capable  of  forming  a  judgment  than  I  am. 

As  regards  the  second  argument,  I  readily  admit  that  in  view  of 
the  great  majority  of  gas  undertakings  in  the  United  States  being 
controlled  by  corporations,  municipal  gas  engineers  are  not  so  num- 
erous as  company  engineers.  But  there  are  many  men  in  company 
employ  occupying  subordinate  positions  who  would  welcome  the 
opportunity  of  showing  their  abilities  in  more  responsible  posts, 
and  the  difficulty,  if  any,  is  by  no  means  insurmountable. 

There  is  little  risk  in  the  ownership  of  a  gas  undertaking;  on 
the  contrary,  if  the  rate  charged  were  reduced,  the  gas  consumption 
in  Kalamazoo  would  rapidly  increase,  bringing  with  it  increasing 
financial  prosperity. 

In  short,  if  the  Company  are  not  prepared  to  enter  into  a  new 
franchise  on  the  basis  of  75  cents  for  gas,  then  I  recommend  the 
Council  to  give  notice  of  their  intention  not  to  renew  the  franchise, 
and  to  take  such  steps  as  are  necessary  to  acquire  the  works  and 
plant. 

Yours  faithfully, 

WM.  NEWBIGGING. 
5  Norfolk  St., 

Manchester,  England. 
March  8,  1915. 

NOTE. — The  above  report  was  completed  with  an  Appendix,  giving  the  "Inventory  of 
Real  Estate  and  Plant  by  the  Kalamazoo  Gas  Company,"  but  as  the  details  enumerated 
are  not  necessary  to  this  discussion,  the  Appendix  is  omitted  here. 


CHAPTER  X. 

MUNICIPAL  OWNERSHIP  OF  GAS  WORKS  IN  GREAT  BRITAIN. 
"Social  and  Financial  Benefits  of   Municipal  Ownership  of  Gas  in  England" 

Mr.  Arthur  Silver thorne,  an  eminent  authority  on  civic  prob- 
lems who  has  been  quoted  by  Pres.  Edmund  J.  James  of  the  Uni- 
versity of  Illinois  in  his  paper  on  "The  Relation  of  the  Modern 
Municipality  to  the  Gas  Supply"  read  before  the  Philadelphia  Social 
Science  Association,  1886,  said  in  a  letter  to  Dr.  James:1 

"I  have  never  swerved  for  a  moment  from  the  opinion  that 
borough  monopolies  in  the  form  of  public  companies  (that  is  what 
we  call  private  gas  monopolies,  such  as  exist  in  nearly  all  American 
cities),  afford  the  very  worst  form  of  despotism  that  a  community 
can  be  subject  to,  and  I  feel  great  surprise  that  anything  can  ever 
be  urged  in  their  favor.  The  gradual  repeal  of  these  monopolies 
(for  the  movement  is  still  in  progress)  has  led  to  cheaper  gas,  richer 
gas,  and  purer  gas.  From  the  moment  our  English  municipalities 
succeeded  in  wresting  the  management  of  these  concerns  from  the 
lethargic  handling  of  these  private  companies,  the  gas  corporations 
(municipalities)  set  such  an  example  of  improved  working  that  it 
completely  awoke  the  modern  Rip  Van  Winkles,  so  much  so  that 
they  have  never  ceased  to  imitate  the  municipal  management,  and 
in  a  large  measure  have  later  emulated  the  prosperity  of  the  town- 
managed  gas  undertakings. 

"I  say,  without  fear  of  contradiction,  that  from  a  scientific  point 
of  view,  twenty  years  ago  the  cities  found  the  production  of  gas, 
owing  to  the  inefficiency  of  management,  a  mere  distillation  of  tar, 
conducted  without  any  regard  to  scientific  laws.  The  distillation  of 
coal  is  now,  on  the  contrary,  owing  largely  to  the  influence  of  the 
public  example,  conducted  on  the  most  scientific  principles;  resid- 
uals that  were  thrown  away  by  our  predecessors  are  now  properly 
manufactured  into  useful  products,  and  the  influence  of  scientific 
method  is  present  at  every  stage  of  the  process.  The  proper  ex- 
traction of  carbonic  acid  gas  alone  was  a  source  of  increased  light 
unthought  of  by  the  old  style  manager.  In  the  same  category  may 
be  put  the  development  of  ammonia  as  a  means  of  reducing  the 
cost  of  manufacture.  But  the  public  (municipal)  corporations  have 
done  a  great  deal  more  than  the  private  companies  can  ever  achieve. 
They  have  redeemed  our  capital  debts  and  lightened  public  taxation." 

1.    Publication  of  Araer.   Econ.   Ass'n,   Vol.    1,  Nos.   2  and   3,   pp.    59-60. 


75 


Municipal  Gas  in  Great  Britain.    A  Lesson  in  Efficiency,  Justice  and 

Democracy. 

Public  ownership  is  largely  responsible  for  the  growth  of  the 
spirit  of  democracy  among  the  English  people.  It  has  given  to  them 
the  ability  to  understand  and  to  practice  successfully  democratic 
ideas  in  government  and  society.  It  has  advanced  their  ideals, 
widened  their  intelligence,  encouraged  their  self-reliance,  and 
cemented  their  love  of  country.  The  advantages  of  public  ownership 
and  operation  in  securing  justice  are  apparent  in  all  the  under- 
takings of  the  British  municipalities.  The  effect  upon  private 
monopolies  is  powerful. 

"Although  company  undertakings  are  practically  monopolies, 
the  interests  of  the  public  have  been  protected  by  Parliament,  and 
local  authorities  have  considerable  power  of  control.  They  may  ap- 
point examiners  to  test  the  illuminating  power  and  quality  of  the 
gas  supplied,  which  must  be  in  accordance  with  a  fixed  standard. 
Statuary  provisions  relating  to  the  testing  of  gas  meters  are  ad- 
ministered by  the  town  councils  of  boroughs  having  10,000  inhabi- 
tants, and  in  other  cases  by  the  county  councils.  The  Gas  Works 
Clauses  Act  of  1847  limits  the  average  profits  of  gas  companies  to 
10  per  cent  per  annum  on  the  paid-up  capital,  and  other  provisions 
in  this  connection  have  been  made  by  later  Acts.  Gas  companies  are 
required  by  Sec.  35  of  the  Gas  Works  Clauses  Act  of  1871  to  send 
to  the  local  authorities  an  annual  statement  in  the  form  prescribed 
by  statute,  made  up  to  31st  December,  on  or  before  25th  March. 
A  copy  of  such  statement  must  be  sold  by  the  company  to  any  appli- 
cant at  a  price  not  exceeding  one  shilling."2 

From  these  official  government  statistics  it  has  been  possible  to 
gain  much  valuable  information  which  has  been  compiled  for  general 
use  in  "THE  MUNICIPAL  YEAR  BOOK:"  "FIELD'S  ANALYSIS  OF  THE 
ACCOUNTS  OF  THE  PRINCIPAL  GAS  UNDERTAKINGS  IN  ENGLAND, 
SCOTLAND  AND  IRELAND/'  and  other  authentic  annual  municipal 
reports. 

According  to  "THE  MUNICIPAL  YEAR  BOOK  OF  THE  UNITED 
KINGDOM  FOR  1913,"  a  report  for  year  1910-11,  there  were  298  gas 
plants  operated  by  "local  authorities"  (municipal  corporations), 
and  511  by  private  companies.  The  total  capital  invested 
by  the  "local  authorities"  was  about  $150,000,000,  and  that  by  the 
companies  more  than  three  times  as  much.  The  local  authorities 
operated  their  plants  at  a  ratio  of  72.96  per  cent,  to  their  income, 
while  the  private  companies  claimed  the  higher  ratio  of  74.87  per 
cent  of  the  gross  earnings.  The  equivalent  return  upon  capital 
invested  by  the  municipalities  was  9^4  per  cent,  while  that  of  the 
private  companies  was  but  5  and  y%  per  cent.  The  local  authorities 

2.    Municipal    Year    Book   of   the    United   Kingdom,    for    1914. 


76 

sold  67,491.765  thousand  cubic  feet  of  gas  to  2,666,146  consumers 
at  an  approximate  average  charge  of  sixty  cents  per  thousand  cubic 
feet.  The  private  companies  sold  115,342,163  thousand  cubic  feet 
of  gas  to  3,751,703  consumers  at  an  approximate  average  charge  of 
sixty-six  cents  per  thousand  cubic  feet. 

By  far  the  larger  number  of  private  gas  companies  operate  in 
England  and  Wales,  chiefly  in  London,  Liverpool  and  Sheffield. 
Scotland  has  55  municipal  gas  plants,  and  only  five  are  privately 
owned,  while  in  Ireland  16  municipalities  own  their  gas  works  and 
the  private  companies  own  13. 

The  Municipal  Gas  Works  of    Widnes,    England,    a    Triumph    of    Municipal 

Ownership.     Best  Quality  Gas  Costing  16  Cents  Per  1,000  Feet  Supplied 

to  Consumers  During   1915   at  22  Cents  to  24   Cents   for  Lighting 

and   16   Cents  for  Power   Purposes   Yielding  Large 

Profit  to  the  City. 

Widnes,  England,  claims  the  distinction  of  making  the  lowest 
priced  gas  in  the  world, 

This  interesting  place  lies  on  the  Mersey  river,  in  Lancashire, 
twelve  miles  south  and  east  of  Liverpool.  It  is  a  city  of  strictly 
modern  growth,  Its  population  having  increased  from  2,000  to  1851 
to  31,544  in  1911.  Lying  close  to  the  coal  fields  and  having  capacious 
docks,  its  situation  is  ideal  for  the  manufacturing  industry  which  it 
maintains. 

Concerning  this  town  the  "Municipal  Year  Book"  (1914)  says: 

"Widnes  became  an  incorporated  borough  in  1892,  after  its 
growing  prosperity  of  twenty  years  The  former  local  board  ac- 
quired the  gas  and  water  undertakings  in  1867.  Both  are  very 
remunerative  undertakings,  and  the  price  of  gas  is  lower  in  Widnes 
than  in  any  other  town  in  the  kingdom" 

The  revenue  account,  1912-13,  as  given  in  the  "Municipal  Year 
Book,"  1914,  is  as  follows : 

Total   capital   expended    $671,644.80 

Total  capital  repaid,  or  in  sinking  fund,  as  provided  by  revenue..  158,457.60 

Total  loans  outstanding  301,154.76 

Income    248,832.00 

Expenditure 200,640.00 

Surplus  or  gross  profit   48,192.00 

Sinking  fund  or  loan  payments   9,768.00 

Interest  on  loans   11,318.40 

Income  tax  on  profits  1,684.80 

Net  surplus  or  net  profit 25,420.80 

Balance  of  reserve  or  renewal  funds   8,505.60 

Charges  for  gas   22c  and  26c 

The  following  very  interesting  comparison  of  rates  in  Widnes 
and  Lancaster,  England,  appeared  in  "The  Gas  Age:"3 

3.    The   Gas  Age,    (New   York),    March   15,    1918,   page   247. 


77 

"Lancaster  recently  claimed  to  make  gas  cheaper  than  Widnes, 
the  English  city  that  has  for  years  held  the  record.  Isaac  Carr,  the 
manager  at  Widnes  denies  such  claim  and  gives  the  cost  in  holder, 
exclusive  of  all  taxes  and  charges  not  involved  in  manufacture,  for 
the  year  1917  as  20.02  cents  for  Lancaster  and  15.90  for  Widnes; 
in  1915  it  was  respectively  16.20  and  9.60  cents  per  1,000  cu.  ft.  of 
gas  sold.  Including  all  charges,  he  submits  the  figures  for  1917  as 
39.78  and  32.10,  respectively,  as  compared  with  38.14  and  22.32 
for  1915.  The  price  of  gas  in  Lancaster,  England,  in  1916  was: 
Lighting,  52.6  to  48.6  cents ;  power,  48.6  to  30.3  cents  net  per  1 ,000 
cu.  ft.  sold.  At  Widnes  the  price  in  1917  was :  Lighting,  36.3  to  32.3 
cents;  power,  28.3  cents;  in  1915  the  lighting  rate  was  24.3  to  20 
cents  and  the  power  rate  16  cents.  These  figures  indicate  that,  al- 
though high  costs  produce  a  proportionately  high  rate  of  increase 
in  the  price  of  low-rate  gas,  the  price  is  even  then  comparatively 
low.  It  will  be  noted  that  the  Widnes  increase  in  price  was  12.3 
cents  for  light  and  power ;  the  increased  cost  of  manufacture,  which 
evidently  represented  the  increased  cost  of  coal  and  labor,  was  6.3 
cents  for  Widnes,  or  about  half  the  total  increase  in  price." — Gas 
Age,  Mar.  15,  1918,  p.  247. 

In  "The  Gas  World  Analyses  of  Municipal  Gas  Accounts,  1913- 
14,"  which  gives  the  full  details  of  expenses  and  receipts  respecting 
78  municipally  owned  gas  plants  in  British  cities,  the  net  cost  of 
manufacturing  and  distributing  highest  quality  of  gas  in  Widnes  is 
given  as  15.8  cents  per  1,000  cubic  feet  after  receipts  from  residuals 
and  other  sources  had  been  deducted. 

These  statistics  show  that  it  cost  Widnes,  per  1,000  cubic  feet, 
9.7  cents  to  manufacture,  3.04  cents  to  distribute  and  3.06  to  cover 
all  other  expenses,  making  a  total  cost  of  15.8  cents  per  1,000  cubic 
feet,  after  deducting  receipts  from  residuals. 

Notwithstanding  the  low  prices  charged  the  consumers,  the  city 
made  a  gross  profit  or  surplus  of  $48,192,  from  which,  after  de- 
ducting all  taxes,  reservations  and  capital  expenses,  there  remained 
a  net  surplus  or  profit  of  $25,420.80. 

During  this  fiscal  year  (1913-14)  this  plant  carbonized  45,090 
tons  of  coal  producing  502,421,000  cubic  feet  of  gas,  some  of  which 
was  used  for  lighting  the  city  without  credit  being  given  the  works 
for  this  service,  and  474,511,000  cubic  feet  of  which  was  sold  to 
consumers  at  24  cents  per  1,000  cubic  feet  for  which  the  city  re- 
ceived $115,817.50. 

The  city  also  sold  14,686  tons  of  coke  at  $1.22  per  ton  for  which 
it  received  $17,938.54.  It  will  be  of  interest  to  the  American  people 
who  are  paying  exorbitant  rates  to  gas  companies  for  coke  to  know 
of  the  justice  with  which  municipal  plants  distribute  coke  as  well  as 
gas  to  the  public.  The  unjust  charges  exacted  for  coke  by  the  gas 
companies  of  America  may  be  realized  when  the  fact  is  known  that 


78 

they  sell  the  coke  for  more  than  they  paid  for  the  coal  before  the 
gas  was  extracted.  Municipal  plants  are  not  operated  in  this  unjust 
way. 

Municipal  Gas  Works  of  Birmingham,  England,  Contribute  $267,966.92  to  Aid 

in  Reducing  Taxation,  Leaving  a  Net  Profit  $915,083.02  All  Made 

in  One  Year,  While  Supplying  Consumers  at  32  Cents  I 

Birmingham,  the  fourth  largest  city  of  England,  owns  its  supply 
of  gas,  water  and  electricity.  Control  of  the  gas  was  taken  over  in 
1875,  of  the  water  in  1892  and  of  the  electricity  in  1900.  This  city 
of  525,960  population  (1911)  has  made  a  remarkable  success  of  its 
municipal  undertakings. 

The  official  report  of  the  Gas  Committee  of  the  City  of  Birming- 
ham for  the  Year  1913  records  most  interesting  data.  In  addition 
to  having  contributed  various  sums  to  the  "Workmen's  Sick  Fund" 
and  for  "bonuses"  to  officers  and  workmen,  they  paid  $267,966.92 
into  the  city  treasury  for  the  relief  of  taxation,  and  had  a  net  profit 
left  of  $915,083.24.  The  gas  was  supplied  to  consumers  at  an  aver- 
age price  of  32  cents. 

In  view  of  these  large  profits  which  were  made  in  spite  of  a 
national  coal  strike  with  resultant  increased  cost  of  fuel  and  labor, 
the  situation  was  somewhat  parallel  to  that  which  faces  the  Ameri- 
can public  today.  We  quote  from  page  7  of  the  report: 

"When  these  facts  are  taken  into  consideration  it  will  be  seen  that 
the  Gas  Department  is  contributing  a  sum  larger  than  in  the  pre- 
vious vear,  and  this  in  the  face  of  the  national  coal  strike  causing  a 
large  increase  in  the  cost  of  coal,  and  the  advance  in  workmen's 
wages  granted  by  the  Council  in  February  last  year,  which  alone 
represents  £10,000  ($48,600)  per  annum  to  the  Gas  Department. 
Further,  the  Council  is  well  aware  that  the  cost  of  all  kinds  of  stores 
and  materials  has  largely  increased  during  the  last  twelve  months, 
while  the  year  just  ended  felt  the  full  effect  of  the  reductions  in 
the  price  of  gas  granted  in  1911." 

According  to  "Field's  Analysis  of  the  Accounts  of  the  Principal 
Gas  Undertakings  in  English  Promncial  Towns  (1013),"  Birming- 
ham Gas  Works  carbonized  631,672  tons  of  coal  from  which  they 
made  9,164,962,000  cubic  feet  of  gas.  From  this  they  sold 
8,659,731,000  cubic  feet  at  an  average  price  of  32  cents.  They  also 
sold  293.194  tons  of  coke  at  approximately  $3.03  per  ton. 

For  every  1,000  cubic  feet  of  gas  sold,  it  cost  Birmingham,  ap- 
proximately 13  cents  to  manufacture,  5  cents  to  distribute,  and  a 
trifle  over  half  of  one  cent  to  manage,  making  with  other  items,  a 
total  working  expense  per  1,000  cubic  feet  of  about  22  cents.  After 
paying  all  expenses,  the  city  made  a  net  profit  of  about  7  cents  per 
1,000  cubic  feet  of  gas  sold. 

Contrasted  with  this  report  for  1913  under  nearly  normal  condi- 


79 

tions,  Birmingham  furnishes  proof  of  what  a  municipality  can  do 
for  its  people  under  stress  of  war. 

In  1916  it  carbonized  nearly  200,000  more  tons  of  coal,  the 
increased  price  of  which  per  ton  raised  the  cost  of  material  to  pro- 
duce each  1,000  cubic  feet  of  gas  sold,  from  $0.2572  to  $0.3922,  yet 
by  careful  management  there  was  practically  no  increase  in  the 
total  working  expenses. 

But  in  order  to  meet  increased  expenses  in  general  due  to  higher 
prices  for  material,  they  raised  the  price  of  gas  from  40  cents  to  46 
cents  per  1,000  cubic  feet,  and  increased  the  price  of  coke  per  ton 
from  $3.03  to  3.51.  At  the  same  time  the  Suburban  Companies  were 
selling  coke  at  an  average  price  of  $4.88,  and  the  Metropolitan  Com- 
panies charged  an  average  price  of  $5.31,  while  in  some  cases  the 
private  companies  charged  over  30  cents  more  per  1,000  cubic  feet 
of  gas  sold,  than  did  the  municipalities. 

The  net  profit  per  1,000  cubic  feet  of  gas  sold  fell  in  Birming- 
ham from  7.12  cents  in  1913  to  3.54  cents  in  1916,  but  in  spite  of 
this  it  put  $127,491  into  the  city  treasurv  to  relieve  taxation  after 
it  has  previously  paid  much  more  than  twice  this  amount  as  regular 
taxe*.  The  argument  in  favor  of  public  ownership  thus  finds  ample 
justification  in  the  case  of  Birmingham,  England. 

Municipal  Ownership  of  Gas  in  Manchester,  England. 

As  a  municipality,  Manchester  is  modern,  and  todav  its  munici- 
pal industries  excel  in  magnitude  those  of  anv  other  British  Provin- 
cial town.  The  City  Council  not  only  serves  Manchester,  but  carries 
on  a  large  business  on  behalf  of  its  smaller  neighbors,  as  Manchester 
is  the  center  of  an  aggregate  population  of  about  a  million  and  a 
quarter,  to  whom  it  supplies  water.  The  area  of  its  gas  supply 
extends  47^  square  miles  and  includes  seven  outlying  districts. 
During  the  vear  1913,  the  contributions  made  by  the  municipal  trad- 
ing undertakings  in  "aid  of  rates"  (taxes)  were:  tramwavs,  $486,- 
000;  gas,  $243,000:  electricity,  $119,070;  and  markets,  $68,040. 

The  Manchester  Gas  Works  were  established  in  1847  by  the 
Police  Commissioners,  who  were  at  that  time  the  governing  body  of 
the  town.  On  the  24th  of  June,  1843,  the  powers  and  duties  of  the 
Commissioners  were  transferred  to  the  "Corporation,"  and  from 
that  date  the  Gas  Works  became  municipal  property.  Private 
parties  have,  therefore,  never  owned  the  gas  plant. 


80 


Comparative  Accounts  of  Municipal  Gas  Works,  Manchester,  England, 
For  Years  1913,  1914  and  1916.* 

1913       | 

Coal  carbonized   (tons)    402,287.00 

Gas  made   (1,000  cu.  ft.)    5,944,838.00 

Coke  made  (tons)   280,401.00 

Gas  sold   (1,000  cu.   ft.) 5,605,233.00 

Price  of  gas  per  1,000  cu.  ft .54 

Coke  sold   (tons)    212,790.00 

Price  of  coke  (per  ton) 3.15 

Receipts  for  coke   668,013.64 

Total   income    4,164,252.12 

Rates    and    taxes    295,211.26 

Net    Profit    926,544.42 

Aid  of  Rates   243,000.00 

Per  1,000  cubic  feet  of  gas  sold: 

From  sale  of  coke  $0.1194 

From  sale   of   gas    .5400 

Net   profit    .1632 

Aid   of   rates    .0428 

Total  working  expenses  less  public  lamps  .2160 


1914| 

1916 

442,983.00 

390,370.00 

6,130,677.00 

6,067,751.00 

297,298.00 

272,196.00 

5,771,415.00 

5,700,014.00 

.52 

.64 

230,524.00 

218,282.00 

2.39 

3.86 

558,209.88 

838,414.84 

3,846,964.96 

4,549,570.30 

313,829.64 

209,038.84 

394,272.36 

686,202.10 

253,157.40 

243,000.00 

$0.0956 

$0.1478 

.5200 

.6400 

.0674 

.1190 

.0434 

.0422 

.2204 

2382 

4.    Field's  "Analysis  of  the  Accounts  of  the  Principal   Gas  Undertakings  in  England, 
Scotland,  and   Ireland." 


CHAPTER  XL 


MUNICIPAL  OWNERSHIP  IN  GREAT  BRITAIN  CONTINUED.    COM- 
PARATIVE RESULTS  IN  EFFICIENCY  AND  SOCIAL  JUSTICE. 

Highly  interesting  data  taken  from  official  reports,  respecting 
the  relative  efficiency,  wages,  costs,  profits,  rates  charged  consumers, 
etc.  is  found  in  "FIELD'S  ANALYSIS  OF  THE  PRINCIPAL  GAS  UNDER- 
TAKINGS OF  ENGLAND,  SCOTLAND  AND  IRELAND  FOR  1913,"  which  is 
universally  acknowledged  as  authoritative,  and  gives  statistics  for 
the  principal  "municipal  corporations"  operating  gas  works  in 
England  and  Scotland,  including  Birmingham,  Bolton,  Bradford, 
Carlisle,  Leeds,  Leicester,  Manchester,  Nottingham,  Oldham  and 
Salford,  Edinburgh  and  Leith,  and  Glasgow.  The  same  report 
also  gives  the  data  for  the  companies  operating  the  nine  largest  gas 
plants  under  private  ownership  (exclusive  of  Greater  London  with 
7,000,000  population),  at  Bath,  Brighton,  Bristol,  Derby,  Newcastle- 
on-Tyne,  Plymouth,  Portsea,  Rochester,  Sheffield  and  Dublin. 

Accounts  of  Gas  Plants  in  English  Provincial  Towns. 

(Field's  Analysis  of  the  Accounts  of  the  Principal  Gas  Undertakings  in  England, 
Scotland,  and  Ireland,  for  the  Year  1913.) 


Municipal    Operation 
Total       Average 
Amount      Amount 
Gas  Made 

(1,000   cubic   feet) 29,526,720    2,952,672 

Gas  Sold 

(1,000  cu.   ft.) 27,768,134    2,776,813 

Gas  unaccounted  for 

(Per   cent   on   make) 4.77 

Gas  used  in  Works 

(1,000  cu.  ft.)    351,753        35,175 

Coal  &  Channel 

(Tons  carbonized)    2,286,006      228,600 

Coke  made 

(Tons)     1,475,910       147,591 

Coke  used  for  fuel 

(Tons)    361,415        36,141 

Coke  made  for  sale 

(Tons)    1,114,495       111,449  656,396 

Miles  of  Mains  4,869  486  2,766 

Private  Consumers  877,266        87,726  479,571 

Private  Consumers 

(Per  Mile  of  Mains) 180  173 

It  will  be  seen  from  the  above  data  that  the  plants  under  munici- 
pal operation  do  a  much  larger  volume  of  business  in  the  English 
Provincial  Towns,  and  that  they  are  more  efficiently  managed  since 
there  is  less  gas  unaccounted  for  and  more  customers  are  served 
per  mile  of  mains. 


Private    Operation 

Total  Average 

Amount  Amount 

17,973,027  1,997,003 

16,863,128  1,873,681 

4.98 

215,114  23,901 

1,412,421  56,936 

870,712  96,746 

214,316  23,817 


72,933 

307 

53,286 


82 


Comparison  of  Accounts  of  Gas  Plants  in  English  Provincial  Towns  For  the 
Years  1913  and  1916  Under  Both  Municipal  and  Private  Ownership. 

Receipts.5 


(Per  1,000  Cubic  Feet  of  Gas  Sold.) 
1913 


Municipal  Private 

Net  Gas  Rate  $0.4832  $0.4316 

Meter  Rental    0016  .0300 

Stove   Rental    0036  .0226 

Total  Gas  Charges $0.4884  $0.4842 

Coke                                                 ..$0.1110  $0.1220 

Breeze    0000  .0046 

Tar  and  its  Products 0484  .0354 

Amm'l.  Liquor   0474 

Total  Receipts  from  Residuals  Sold. $0.2068  $0.2018 

Summary  of   Receipts. 

From  Gas  Charges    $0.4884  $0.4842 

From  Residuals   2068  .2018 

Miscellaneous    0526  .0044 


1916 

Municipal  Private 

$0.5404  $0.5080 

.0018  .0294 

.0046  .0238 

$0.5468       $0.5612 


$0.1424 
.0000 
.0300 
.0504 

$0.2228 


$0.5468 
.2228 
.0032 


.1664 
.0042 
.0260 
.0480 

$0.2446 
\ 


$0.5612 
2446 
.0046 


$0.7728   $0.8104 


TOTAL  INCOME    $0.6978       $0.6904 

(Per  1,000  Cubic  Feet  of  Gas  Sold) 
(Less  Public  Lamp  Charges.) 

It  should  be  noted  that  while  the  total  charges  for  gas  and  the 
use  of  the  meters  and  stoves  was  slightly  greater  under  municipal 
operation  during  1913,  the  municipal  plants  constantly  supplied  a 
higher  quality  than  the  companies,  as  shown  hereafter;  and  the 
order  was  reversed  in  1916  when  the  total  charge  under  private 
operation  was  greater.  It  must  be  remembered,  that  in  addition  to 
the  higher  taxes  which  they  paid,  the  municipal  plants  made  large 
profits,  which  were  used  for  public  improvements  and  the  "common 
good,"  while  the  companies  profits  were  enjoyed  only  by  the  stock- 
holders. During  both  years  the  private  plants  sold  coke  to  the 
people  at  a  higher  price,  but  received  less  for  their  tar  and  ammo- 
niacal  liquors  which  would  indicate  that  these  latter  products  were 
either  inferior  or  that  they  were  sold  to  business  firms  instead 
of  to  the  general  public  as  the  people  would  be  more  interested 
in  buying  coke  at  the  lowest  rate  possible,  since  coke  is  so  gen- 
erally used  for  fuel  in  the  homes,  and  a  larger  profit  would 
result  to  the  companies  by  raising  the  rate  on  coke.  Hence  it  will 
be  seen  by  the  report  of  1916  that  the  people  were  directly  benefited 
by  municipal  operation  by  paying  less  for  their  gas  and  less  for 
their  coke.  The  saving  to  the  people  in  these  two  respects  has  no 

5.    Data  from  "Field's  Analysis  of  the  Accounts  of  the  Principal   Gas  Undertakings 
in  England  Ireland,  and  Scotland"  for  the  years   1913   and   1916. 


83 


doubt  helped  greatly  in  assisting  the  people  to  aid  the  Government 
through  small  loans  to  help  win  the  war. 

Addition  of  the  total  gas  charges  under  municipal  ownership 
during  the  years  1913  and  1916  respectively  gives  an  average  charge 
for  the  two  periods  of  51.76  cents  per  1,000  cubic  feet  and  the  cor- 
responding average  under  private  ownership  is  52.27  cents.  It  must 
not  be  forgotten  that  in  both  cases  a  large  profit  was  made  in  the 
operation  of  the  gas  works,  which  in  the  case  of  the  municipal 
plants  went  to  the  people  and  in  the  case  of  the  private  plants  bene- 
fited none  but  the  few  stockholders. 

Comparison  of  Accounts  of  Gas  Plants  in  English  Provincial  Towns  For  the 
Years  1913  and  1916  Under  Both  Municipal  and  Private  Ownership. 

Expenses6 
Per  1,000  Cubic  Feet  of  Gas  Sold. 

Cost  of  Material. 

1913  1916 

Municipal    Private  Municipal      Private 

Coal,  oil,  and  spirits $0.2592       $0.2992  $0.3612       $0.4084 

Less  residuals  $0.2068           .2018  .2228          .2446 

Net  coal .$0.0524       $0.0974          $0.1384       $0.1638 

Cost  to  Manufacture. 

Salaries  .$0.0064  $0.0072  $0.0066  $0.0068 

and  Wages   0448  .0384  .0420  .0432 

Purifying .0032  .0092  .0016  .0078 

Wear  &  Tear  0682  .0738  .0744  .0766 

Total .$0.1226       $0.1286          $0.1246       $0.1344 

Cost  to  Distribute. 

Salaries  &  Wages  .                       .  .$0.0180  $0.0132  $0.0178  $0.0132 

Wear  &  Tear 0194  .0228  .0154  .0218 

Meter  Repairs .0130  .0178  .0120  .0150 

Stove  Repairs  0092  .0220  .0092  .0236 

Gas  Fittings 0000  .0010  .0000  .0008 

Total $0.0596       $0.0768          $0.0544       $0.0744 

Cost  to  Manage. 

Directors  &  Auditors  $0.0000  $0.0052  $0.0000  $0.0050 

Salaries 0052  .0072  .0054  .0078 

Collectors'    Commissions    0060  .0056  .0058  .0056 

Stationery  &  General  Charge 0054  .0070  .0054  .0076 

Total    ,  ..$0.0166  $0.0250  $0.0161  fe  $0.0260 

Public   lamps    $0.0014  5I0.0030  $0.0006  $0.0012 

Rents  Payable  $0.0022  $0.0250  !  50.0024  $0.0010 

Rates   and  Taxes    ..$0.0402  $0.0250  $0.0472  $0.0278 

6.    Data  from  "Field's  Analysis  of  the  Accounts  of  the  Principal  Gas  Undertakings 
in    England,   Ireland   an'd    Scotland,"    for   the  years    1913   and    1916. 


84 

Perusal  of  the  above  table  relative  to  the  respective  expenses 
incurred  by  the  municipal  and  by  the  private  plants  will  show  that 
the  companies  paid  more  for  coal  than  did  the  cities.  This  probably 
may  be  accounted  for  by  a  duplication  of  interest  on  the  part  of 
certain  directors  holding  stock  both  in  the  gas  plants  and  in  the 
coal  mines,  whereby  profit  may  be  made  on  high  prices  for  coal  as 
well  as  on  the  gas  manufactured  from  the  coal.  It  is  an  almost 
universal  custom  in  America  among  the  railway,  gas,  electric,  power, 
and  other  public  utility  companies  to  take  advantage  of  interlocking 
directorates  in  the  purchasing  of  supplies,  whereby  they  buy  from 
one  another  to  their  mutual  advantage,  and  at  the  expense  of  the 
public  which  pays  the  difference, 

Summary  of  Receipts  and  Expenses  of  Municipal  and  Private  Gas  Plants  in 
English  Provincial  Towns.7 

For  the  Year  1913. 

(Per  1,000  Cubic  Feet  of  Gas  Sold.) 

Municipal  Operation  Private  Operation 

Total    Income    ,  ..$0.6978  ..$0.6904 

Cost  of  Coal,  etc  .....$0.2592  $0.2992 

Working  Expenses     2448  .2620 

Total  Coal  &  Working  Expenses $0.5040  $0.5612 

GROSS   PROFIT    .                     ..$0.1938  $0.1282 

NET    PROFIT    $0.1140  $0.1092 

For  the  Year  1916. 
(Per  1,000  Cubic  Feet  of  Gas  Sold.) 

Total  Income    .  ....$07728  $0.8104 

Cost  of  Coal,  etc .$0.3612  .4084 

Working  Expenses    2606  .2734 

Total  Coal  &  Working  Expenses  .6218  $0.6818 

GROSS  PROFIT    $0.1510  $0.1286 

NET   PROFIT    $0.0734  $0.1062 

Conclusions   Respecting   Comparative   Efficiency   and   Charges   for   Gas   Under 
Municipal   and   Private  Ownership   in   English   Provincial  Towns. 

In  the  final  summary  of  the  accounts  of  the  gas  plants  in  the 
principal  English  Provincial  Towns  certain  facts  are  self  evident. 
During  normal  conditions  the  municipally  operated  plants  made  an 
average  net  profit  slightly  above  that  made  by  the  privately  operated 
plants,  but  all  of  this  profit  went  for  the  public  good  in  the  way 
of  reducing  taxation,  erecting  public  improvements,  increasing  the 

7.  The  data  from  "Field's  Analysis"  for  the  year  1913  includes  ten  town  plants  un- 
der municipal  operation  and  aine  under  private  plants.  The  data  for  1916  includes 
eleven1  plants  under  municipal  operation  and  nine  under  private  operation. 


85 

efficiency  of  the  gas  plant  by  introduction  of  improved  methods  and 
machinery  whereby  better  service  could  be  obtained,  whereas  all 
the  net  profits  of  the  private  plants  were  enjoyed  by  the  stockholders 
alone.  For  instance,  during  1913  the  group  of  municipally  owned 
plants  above  referred  to,  in  addition  to  the  net  profit  made  from 
their  plants,  paid  into  the  public  fund  in  the  form  of  rates  and  taxes 
the  combined  sum  of  $1,130,19374,  while  the  corresponding  group 
of  private  plants  paid  rates  and  taxes  only  to  the  amount  of  $425,- 
493,  this  being  at  the  rate  of  4.02  cents  per  1,000  cubic  feet  of  gas 
sold  for  the  municipal  plants  and  2.5  cents  for  the  private  plants. 
In  1916  the  municipal  plants  paid  taxes  at  the  rate  of  4.72  cents 
per  1,000  cubic  feet  of  gas  sold,  while  the  private  plants  paid  but 
2.78  cents. 

Further  comparison  of  the  statistics  given  in  the  foregoing  data 
showed  the  higher  efficiency  of  municipal  ownership  and  operation 
the  benefits  of  which  add  to  the  well-being  of  the  people. 

Higher  Efficiency  of  Municipal  Ownership. 

1.  The  "Municipal  corporations"  furnish  a  better  quality  of  gas 
both  in  illuminating  power  and  heating  capacity.    In  1913  the  mu- 
nicipal corporations  supplied  an  average  candle  power  in  England 
of  16.99  candles,  and  in  Scotland  of  17.55  candles.     The  private 
companies  supplied  an  average  of  15.95  candles  in  England,  while 
in  Dublin  the  illuminating  power  fell  to  14.50  candles.    In  England 
the  municipalities  furnished  gas  containing  from  570  to  617  British 
Thermal  Units,  while  that  supplied  by  the  private  companies  ranged 
from  475  to  600  B.  T.  U. 

2.  The  municipal  corporations  produce  gas  at  less  cost  than  do 
the  private  companies.    This  is  largely  due  to  the  higher  efficiency 
in  the  operation  of  the  plants,  as  well  as  to  the  fact  that  the  munici- 
palities can  buy  coal  cheaper  because  there  are  no  private  interests 
involved  to  advance  the  price  and  secure  unjust  profits,  as  in  Amer- 
ica, where  gas  directors  also  control  coal  mines.    On  the  average,  it 
requires  .077  tons  of  coal  to  produce  1,000  cubic  feet  of  gas.    Both 
the  quality  and  quantity  of  the  gas  depends  to  some  extent  upon 
the  grade  of  the  coal  and  the  method  of  manufacture.    In  1913  the 
average  cost  to  English  municipal  corporations  to  produce  and  dis- 
tribute 1,000  cubic  feet  of  gas  was  24.48  cents,  while  it  cost  the 
English  private  companies  1.72  cents  more.    The  private  company 
in  Dublin  expended  37.84  cents  for  the  same  results,  this  being  ten 
cents  more  than  it  cost  the  municipal  corporations  in  Scotland. 

3.  The  municipal  corporations  pay  higher  wages  on  the  average, 
and  furnish  better  working  conditions  for  their  employees.     For 
instance,  in  1913  the  English  municipalities  paid,  per  1,000  cubic 
feet  of  gas  produced,  .64  cents  for  salaries  and  4.48  cents  for 
wages  in  the  manufacturing  department.     The  private  companies 
paid  .72  cents  for  salaries  and  3.84  cents  for  wages  to  labor  in  the 


86 

same  department.  The  municipalities  paid  1.80  cents  per  1,000 
cubic  feet  for  salaries  and  wages  to  distribute  their  gas,  and  the 
private  companies  paid  1.32  cents  for  the  same  services.  Under 
"management  charges,"  the  municipalities  apparently  paid  nothing 
to  directors  and  auditors  while  the  private  companies  paid  .52  cents 
per  1,000  cubic  feet  of  gas  produced.  In  this  department,  the 
salaries  of  the  officials  in  the  private  offices  were  greater  by  .10 
cents  per  1,000  cubic  feet.  These  items  together  with  the  increased 
expenditures  for  stationery  and  general  charges  made  the  total 
management  charges  of  the  private  companies  average  2.50  cents 
per  1,000  cubic  feet  of  gas  produced,  while  the  municipalities 
managed  their  business  for  1.66  cents  per  1,000  cubic  feet.  The 
reader  will  note  in  this  connection  that  the  working  man  in  England 
earns  more  wages  when  employed  by  the  municipality  than  when 
working  for  a  private  company.  The  latter  employed  discriminates 
in  favor  of  salaries.  What  the  municipality  saves  from  salaries 
it  gives  to  labor. 

4.  The  municipal  corporations  obtain  more  gas  and  more  by- 
products from  a  ton  of  coal.     In  1913  the  English  corporations 
obtained  29,526,720  thousand  cubic  feet  of  gas  and  1,475,910  tons 
of  coke  from  2,286,006  tons  of  coal  carbonized.    The  English  pri- 
vate companies  obtained  17,973,027  cubic  feet  of  gas  and  870,712 
tons  of  coke  from  1,412,421  tons  of  coal  carbonized.     Coke  was 
thus  produced  at  the  rate  of  12.91  cwt.  per  ton  of  coal  by  the 
municipalities  and  at  the  rate  of  12.33  cwt.  by  the  private  com- 
panies.   Less  gas  was  also  unaccounted  for  by  the  public  works  in 
England,  the  ratio  being  4.77  per  cent,  by  the  corporations  and  4.98 
per  cent,  by  the  private  companies. 

5.  The  municipal  corporations  sell  gas  at  a  lower  rate  and  charge 
the  people  less  per  ton  of  coke.     This  is  the  natural  result  of  the 
change  of  aim  from  private  profit  to  public  service.    The  "Municipal 
Year  Book  for  1913"  gives  the  approximate  average  charge  for 
1,000  cubic  feet  of  gas  as  60  cents  by  the  municipal  authorities,  and 
as  66  cents  by  the  private  companies.     However,  the  same  year 
Lancaster  Corporation  sold  gas  at  46  cents  per  1,000  cubic  feet 
for  private  lighting,  and  the  little  town  of  Widnes  with  a  popula- 
tion of  31,544  (Census  1911)  sold  gas  to  large  consumers  at  22 
cents  and  to  smaller  consumers  at  26  cents. 

According  to  "Field's  Analysis  for  1913,"  the  English  corpora- 
tions sold  coke  at  an  average  price  of  $2.77  per  ton,  while  the  pri- 
vate companies  there  sold  it  at  an  average  price  of  $3.17  per  ton. 
The  lowest  rate  made  by  the  municipalities  was  at  Salford  where 
the  price  of  coke  was  $2.17,  this  being  just  $1.00  less  than  the 
average  price  charged  by  the  private  companies.  The  lowest  rate 
made  by  the  companies  was  at  Bristol  where  the  price  of  coke  was 
$2.77.  It  will  be  noted  that  this  is  the  average  price  charged  by 
the  municipalities. 

6.  Meter  rents  are  also  unusually  low  under  municipal  opera- 


87 

tion.  This  is  probably  due  to  the  large  use  of  prepayment  meters 
which  are  more  frequently  furnished  without  charge  to  the  poorer 
classes  to  encourage  the  use  of  gas.  During  1913  but  five  of  the 
ten  English  cities  mentioned  charged  meter  rental  in  the  municipal 
gas  works  and  this  charge  was  at  the  average  rate  of  .16  cents  per 
1,000  cubic  feet  of  gas  sold.  On  the  other  hand,  the  average  meter 
rental  charged  by  the  private  companies  the  same  year  was  3  cents 
per  1,000  cubic  feet  sold,  being  eighteen  times  as  great.  No  meters 
were  free  and  the  lowest  meter  rental  was  1.94  cents.  For  stove 
rental  pere  1,000  cubic  feet  sold,  the  municipalities  charged  on  the 
average  .36  cents  and  the  private  companies  2.26  cents.8 

"This  policy — for  it  is  a  conscious  attempt  upon  the  part  of  the 
towns  to  make  gas  lighting  as  cheap  as  possible — does  not  affect 
the  finances  greatly.  The  receipts  are  reduced  somewhat,  it  is 
true,  and  the  expenses  are  increased,  but  the  great  social  gain  which 
comes  from  the  much  larger  number  of  consumers  per  1,000  popu- 
lation where  there  are  municipal  plants,  more  than  pays  for  any 
loss  of  profits."9 

7.  Gas  is  used  more  extensively  when  under  municipal  operation. 
"Probably  the  most  striking  difference  between  private  and  public 
ownership  is  to  be  seen  in  the  number  of  consumers.     Upon  the 
basis  of  capitalization,  receipts,  expenditures,  coal  carbonized,  gas 
sold,  etc.,  the  ratio  of  private  to  municipal  works  is  about  two  to 
one ;  yet  the  number  of  consumers  is  practically  equal ;  that  is,  the 
per  capita  consumption  under  private  operation  is  much  greater 
than  under  municipal  operation.   . .   This  fact  does  not  indicate  a 
disposition  upon  the  part  of  the  people  in  the  same  social  and 
economic  position  to  use  less  where  the  supply  is  public;  indeed, 
the  contrary  is  true,  owing  to  cheaper  price  and  better  service. 
What  it  does  indicate  is  that  under  municipal  operation,  a  larger 
number  of  the  poorer  classes  use  gas/'10 

During  1913  the  average  number  of  cubic  feet  used  by  "con- 
sumers" of  municipal  gas  in  England  was  31,652,  while  each  "con- 
sumer" of  private  gas  averaged  3,509  cubic  feet  more.11  If  the 
private  companies  had  had  a  greater  number  of  patrons,  the  average 
would  have  been  less,  hence  it  is  easy  to  see  that  a  greater  number 
of  people  take  advantage  of  municipal  operation. 

8.  The  attitude  of  the  municipality  towards  profits  differs  greatly 
from  that  of  the  private  company.     Companies  aim  to  declare  as 
large  dividends  as  possible.     Municipalities  think  more  of  better 
service  and  lower  charges  than  of  decreased  taxes.    In  Scotland  the 
law  prohibits  the  use  of  profits  to  lower  taxation  ("in  aid  of  rates"), 
but  permits  them  to  be  used  for  public  improvements.     In  other 

8.  Field's  Analysis  1913. 

9.  "Gas  Lighting  in   Great  Britain,"   by  Milo   Roy  Maltbie,  in   "Municipal   Affairs," 
Vol.  4,  page  557. 

10.  Idem,  page  559. 

11.  Field's  Analysis,    1913. 


88 

parts  of  the  realm  the  usual  aim  is  to  benefit  the  taxpayer.  During 
1913  the  English  municipal  works  contributed  $1,455,163.20  to 
relieve  general  taxation,  while  the  English  companies  paid  into  this 
fund  but  $296,270. 

9.  The  plants  of  the  municipalities  are  more  substantial,  efficient 
and  artistic  than  those  of  the  companies,  pains  being  taken  to  secure 
symmetry  and  artistic  effect,  while  practicing  the  strictest  economy 
possible.  The  reason  for  this  is  that  the  plants  under  municipal 
ownership   are  public   institutions,   and   the  municipalities   feel   a 
civic  pride  in  them.    The  private  companies  are  more  interested  in 
producing  profits.     This  is  evidenced  by  the  fact  that  the  cost  of 
municipal  plants  averages  $2.51  per  1,000  cubic  feet  of  gas  pro- 
duction annually,  while  the  companies  under  private  operation  in- 
vest in  construction  10  cents  per  1,000  cubic  feet  less,  but  with  an 
actual  value  far  less  than  the  difference  in  cost. 

10.  Lighting  of  public  places  is  more  adequate  when  done  by 
municipal  authorities,  for  the  people  of  Great  Britain  realize  that  an 
abundant  use  of  artificial  light  is  a  potent  safeguard  against  crime. 
"Each  light  counts  for  a  constable,"  is  a  common  saying  of  the 
chiefs  of  police.    Not  only  are  the  courts  and  regular  streets  lighted 
at  public  expense,  but  the  common  stairs  of  tenement  houses  are 
equally  well  lighted.     It  is  safe  to  say  that  more  than  one  half  of 
the  gas  used  in  the  United  Kingdom  is  both  supplied  and  con- 
sumed by  the  public. 

Universal  Satisfaction. 

The  gains  of  public  operation  in  Great  Britain  are  so  obvious 
that  there  is  no  desire  to  return  to  private  control.  Men  of  the 
highest  type  take  civic  pride  in  serving  upon  the  city  council  since 
it  affords  an  opportunity  for  patriotic  service.  They  give  gener- 
ously of  their  time,  and  study  improved  methods  both  at  home  and 
abroad.  As  a  rule,  cities  which  conduct  municipal  undertakings 
are  eager  to  introduce  improvements.  The  mass  of  the  people 
take  an  active  interest  in  the  reports  of  the  various  departments, 
and  even  friendly  rivalry  is  stimulated  between  cities,  as  is  evidenced 
in  the  case  of  Widnes  and  Lancaster.  Perhaps  no  other  nation 
so  well  reveals  the  superiority  of  public  to  private  operation  as  does 
Great  Britain  where  the  test  of  time  throws  the  balance  in  favor 
of  public  ownership  and  operation  of  public  utilities. 


89 


Municipal  Ownership  in  New  Zealand. 

New  Zealand's  towns  have  had  for  many  years  the  right  to 
establish  municipal  water,  gas,  and  electric  light  plants,  and  tram- 
lines. Sir  Robert  Stout,  now  Chief  Justice  of  the  Colony,  said  a 
few  years  ago:  "In  most  towns  that  have  been  incorporated  the 
municipality  owns  both  the  gas  and  the  water  works.  The  tram- 
ways pay  a  rental  to  the  municipality  which  reserves  the  option  of 
purchase.  There  are  some  privately  owned  gas  works  it  is  true, 
but  the  tendency  is  for  the  municipality  to  become  its  own  sup- 
plier of  gas,  water,  libraries,  bath  houses,  etc."  At  present  (1903) 
all  the  cities  own  and  operate  their  street-car  lines,  water,  gas  and 
electric  plants,  and  the  general  results  are  very  satisfactory.  The 
service  is  good  and  the  rates  much  lower  than  in  the  United  States 
with  private  ownership,  the  ordinary  wages  and  prices  range  higher 
in  New  Zealand  than  in  our  country. 

—Parsons :  "The  Story  of  New  Zealand,"  page  428. 


CHAPTER  XII. 
MUNICIPAL  OWNERSHIP  IN  GERMANY. 

The  recognized  success  attending  both  national  and  municipal 
ownership  in  Germany  has  been  such  that  private  ownership  of  any 
public  service  will  soon  be  practically  unknown  unless  the  war 
results  in  radically  changing  the  conditions  preceding  it.  Efficiency 
and  reduction  of  rates  to  the  public  has  marked  Government  opera- 
tion of  the  railways,  the  telegraph  and  the  telephone  for  many 
years.  Even  at  lowered  rates,  an  immense  revenue  has  been  derived 
from  these  sources,  and  taxation  has  thereby  been  materially 
reduced. 

Municipal  ownership  has  met  with  equal  success.  Of  the  50 
largest  German  cities,  the  entire  50  now  own  their  gas  works,  water 
works  and  slaughter  houses ;  45  own  the  electric  works,  and  30  the 
street  railways.  Besides  these,  many  cities  own  their  markets,  baths, 
laundries,  banks  for  loaning  to  the  poor,  etc.  This  shows  an  advance 
since  1908,  at  which  time  a  report  was  made  of  85  cities  of  over 
50,000  inhabitants,  when  79  owned  their  water-works,  65  their  gas 
works,  63  the  electricity  supply,  35  the  tramways,  and  82  the 
abattoirs  or  slaughter  houses,  while  a  large  per  cent  of  the  cities 
between  5,000  and  20,000  and  20,000  and  50,000  own  the  same 
activities. 

In  the  majority  of  instances  the  tramways  and  gasworks  were 
originally  operated  by  private  corporations  under  grants  from  the 
cities.  Substantial  revenues  were  and  are  received  for  these  con- 
cessions. In  1910  Berlin  derived  a  revenue  of  $2,500,000  from 
concessions  of  all  kinds.  But  private  ownership  has  generally 
proved  to  be  unsatisfactory  and  the  tendency  of  municipalities  is 
to  acquire  possession  as  rapidly  as  possible. 

The  largest  contribution  to  the  city  treasury  came  from  the  gas, 
electric  works  and  tramways.  The  total  amounts  received  as  profits 
to  be  used  for  the  relief  of  taxation  in  a  number  of  the  larger  cities 
in  1910  were  as  follows:  Berlin,  population  2,071,800,  gas-works 
$1,939,900,  water-works  $705,100,  and  tramways  $42,750;  Breslau, 
population  512,100,  gas-works  $659,050,  electric-works  $310,500, 
water-works  $263,200:  Cologne,  population  516,500,  gas-works 
$328,650,  electric-works  $274,950,  water-works  $283,850,  and  tram- 
ways $292,400,  or  a  total  of  $1,179,850.  Dresden,  population  548,- 
300,  makes  an  even  better  showing.  It  also  owns  all  of  its  public 
service  utilities.  The  gas-works  earned  $782,000,  electric-works 
$400,250,  water-works  $45,650,  and  tramways  $271,800,  or  a  total 
of  $1,499,700.  Frankfort-on-the-Main  does  not  own  its  gas  ser- 
vice, but  the  electric-works  yielded  $725,400,  the  water-works  $170,- 


91 

900,  and  the  tramways  $368,550.  Including  the  royalties  from  the 
gas-works,  the  net  receipts  from  the  public-service  corporations 
were  $1,426,300  for  the  year.  Nuremberg,  population  333,200  owns 
all  the  public  utilities,  and  received  (1910)  a  total  contribution  for 
the  relief  of  taxation  of  $61,700,  while  Munich,  population  596,500, 
which  also  owns  all  its  public  utilities,  enjoyed  a  total  income  from 
these  sources  of  $1,110,100.  Taking  twelve  of  the  larger  cities, 
with  a  combined  population  of  7,464,300,  it  appears  that  the  net 
profits  amounted  to  $17,107,300,  or  an  equivalent  of  $2.30  per  capita. 

The  profits  referred  to  are  the  net  earnings  after  all  payments 
have  been  made  for  interest,  depreciation,  redemption  of  capital, 
and  additions  to  the  renewals  and  reserve  funds.  The  profits  are 
also  independent  of  any  payments  on  account  of  paving  and  street 
cleaning  and  local  taxes. 

As  a  consequence  of  the  policy  of  municipal  socialism  the 
indebtedness  of  the  average  German  city  is  very  high,  but  as  an  off- 
set a  large  part  of  the  indebtedness  is  for  undertakings  which  are  self 
supporting  and  involve  no  burden  to  the  taxpayers,  whereas  the  in- 
debtedness of  the  average  American  city  is  for  the  most  part  for 
streets,  sewers,  parks,  schools,  playgrounds,  and  fire  and  police 
equipment,  which  are  non-revenue  producing.  The  indebtedness 
of  the  German  cities  is  very  largely  of  a  profit-making  sort.12 

Berlin  and  Philadelphia  in  1909  had  practically  the  same  total 
indebtedness  although  Berlin  is  the  larger  city  of  the  two.  Practi- 
cally two-thirds  of  the  indebtedness  of  Berlin  was  for  productive 
undertakings  and  one-third  for  other  purposes  such  as  schools, 
streets,  sewers,  etc.,  while  the  order  of  indebtedness  in  Philadelphia 
was  reversed,  one-third  being  for  productive  undertakings  and  two- 
thirds  for  other  purposes. 

"Herein  is  one  explanation  of  the  protest  against  municipal 
indebtedness  in  this  country.  Our  indebtedness  is  "dead"  indebt- 
edness. It  yields  no  return.  It  is  a  burden  to  the  taxpayers.  And 
it  is  growing  rapidly.  The  German  city,  on  the  other  hand,  has  no 
fear  of  indebtedness,  for  it  is  usually  represented  by  profit-making 
properties.  It  is  recognized  as  good  business  for  the  city  to  go  into 
debt,  especially  where  a  financial  return  may  reasonably  be  ex- 
pected from  the  investment,  either  immediately  or  in  the  future.18 


12.  Howe,    "Socialized   Germany,"   pp.   292-294. 

13.  "Socialized  Germany,"  page  295. 


CHAPTER  XIII 

OPINIONS  RESPECTING  PUBLIC  OWNERSHIP  BY  EMINENT 
AUTHORITIES. 

Public  ownership  of  public  utilities  is  not  merely  a  matter  of 
philosophy,  it  is  a  question  of  justice  and  expediency.  A  century 
of  test  in  Europe  and  America  amid  the  spread  of  mis-information 
and  prejudice  has  recorded  results  which  thinking  men  are  bound 
to  consider.  The  progressive  student  of  public  affairs  cannot  search 
the  records  of  the  past  nor  investigate  the  conditions  of  the  present 
without  coming  to  but  one  conclusion,  namely,  that  public  owner- 
ship and  operation  of  public  utilities  is  an  essential  and  funda- 
mental feature  of  democratic  government. 

It  is  not  only  a  right,  it  is  also  a  duty.  It  involves  democracy, 
public  welfare,  social  justice  and  the  national  defense.  There  can 
be  no  good  and  useful  citizenship  without  civic  responsibilities  and 
the  actual  participation  in  government  by  the  citizens.  Otherwise, 
the  citizen  is  degraded  to  an  automaton,  who,  while  nominally  hold- 
ing the  rights  of  citizenship,  is  unable  to  exercise  those  rights  prop- 
erly for  his  own  and  the  common  good. 

Every  moment  which  endures  and  serves  humanity  passes 
through  successive  stages  of  evolution,  in  time  reaching  its  highest 
efficiency.  Contemporary  with  it,  the  mind  of  the  on-looker  changes 
until  at  length  he  gets  the  vision  of  infinite  possibility  and  falls  into 
line  to  aid  and  be  aided.  Such  is  the  history  of  public  ownership. 

The  line  of  great  thinkers  who  have  thus  championed  this  most 
progressive  issue  yearly  increases.  In  America  and  in  foreign 
countries  alike,  the  number  of  statesmen  and  scholars  who  advo- 
cate public  ownership  as  essential  to  social  justice  is  rapidly  aug- 
mented. Since  the  previous  chapters  of  this  work  have  been  de- 
voted largely  to  a  study  of  conditions  as  they  actually  exist  under 
both  public  and  private  ownership  as  exhibited  in  the  official  re- 
ports and  records,  or  as  described  from  the  personal  observation  of 
the  author,  it  seems  fitting  that,  in  closing,  a  place  should  be  given 
to  the  publicly  expressed  opinions  and  conclusions  of  men  whose 
character  is  universally  acknowledged  as  the  highest,  and  whose 
scholarship  is  so  well-known  as  to  place  them  among  the  most 
eminent  authorities.  It  is  accordingly  with  pleasure  that  the  author 
presents  the  following  quotations. 


93 


Corporate  Plots  to  Strangle  Public  Opinion. 
HON.  NEWTON  D.  BAKER. 

In  his  opening  remarks  as  presiding  officer  at  one  session  of 
the  Conference  of  American  Mayors  held  in  Philadelphia,  Novem- 
ber, 1914,  Hon.  Newton  D.  Baker,  now  Secretary  of  War,  then 
Mayor  of  Cleveland,  expressed  his  opinion  concerning  municipal 
ownership.  He  stated  as  his  belief  that  the  movement  for  municipal 
ownership  in  the  United  States  was  the  direct  and  immediate  fruit 
of  the  misconduct  of  privately  owned  public  utilities.  He  called 
attention  to  that  vulgar  worship  of  success  in  the  United  States 
which  emulated  as  the  highest  development  of  American  initiative 
those  men  who  had  secured  grants  of  great  privileges  out  of  which 
they  had  made  great  fortunes,  and  by  whose  unprecedented  riches 
we  had  been  dazzled.  This  worship  of  the  "Golden  Calf"  has  cor- 
rupted American  politics  and  the  social  fabric.  But  scenting  the 
fact  that  an  effort  would  be  made  to  throw  off  corporate  power, 
the  private  interests  have  taken  the  initiative  of  combining  to  defeat 
such  a  policy.  In  calling  attention  to  this  point,  Mr.  Baker  said: 

"The  whole  controversy  has  now  come,  I  think,  to  this  state, 
that  the  privately  owned  nublic  utilities  are  banded  together  to 
maintain  the  status  quo.  By  that  I  mean  that  they  have  in  large 
part  abandoned  the  idea  that  they  can  secure  extortionate  and  ex- 
orbitant grants  from  the  public  now,  but  the  combined  efforts  of  the 
privately  owned  public  utilities  companies  in  this  country  are  ex- 
erted in  the  direction  of  maintaining  what  they,  have  already 
secured.  Thev  now  would,  I  think,  be  perfectly  willing  and  per- 
fectly satisfied  to  have  practically  every  citv  in  the  country  take 
over  for  public  management  the  public  utilities  if  thev  would  pay 
them  the  face  value  of  their  claims,  for  what  thev  have  already 
secured.  They  would  be  willing  to  sell  us  their  plants  and  their 
sins,  if  we  would  buy  both.  The  difficulty  with  the  situation  is  that 
we  want  to  buv  their  plants  and  do  not  want  to  buy  their  sins.  The 
consequence  of  that  is,  there  is  a  highly  confederated,  expertly 
organized,  skillfully  managed  combination  among  the  privately 
owned  public  utilities  of  this  country  to  pervert  and  mislead  and 
strangle  public  opinion  on  the  subject."1 

The  Way  Out:  Municipal  Ownership. 
HON.  FREDERIC  C.  HOWE. 

United  States  Commissioner  of  Immigration,   Author  of  "Privilege   and  Democracy  in 
America,"  "The  City  the  Hope  of  Democracy,"  "European  Cities  at  Work,"  Etc. 

"In  almost  every  state  we  have  endeavored  to  correct  the  evils 
of  monopoly  by  public  regulation.  Railway  and  franchise  com- 
missions have  been  created,  and  the  resources  of  legislation  and  the 

1.    "Annals  of  the  American  Academy,"  Vol.   LVII,  pare   192. 


94 

common  law  called  to  our  aid  in  this  attempt.  Upon  this  alterna- 
tive of  regulation  we  have  rested  all  our  hopes,  for  all  admit  that 
competition  has  failed  and  unregulated  monopoly  is  inimical  to 
freedom.  Aside  from  public  regulation,  there  is  but  one  alternative, 
and  that  is  public  ownership.  In  hundreds  of  instances  we  have 
tried  the  former  alternative.  Resort  has  been  had  to  legislation 
in  some  form  or  other  in  almost  every  state  in  the  Union.  But  the 
uniform  experience  in  national,  state  and  city  affairs  has  demon- 
strated that  in  many  instances  these  creatures  of  the  law  have  be- 
come greater  and  more  powerful  than  the  source  of  their  power, 
the  state,  which  gave  them  being. 

"The  Citizens'  Union  of  New  York  in  reporting  on  the  legis- 
lation of  the  session  of  the  Assembly  at  Albany  in  1905,  said  of  the 
bill  creating  a  State  Gas  and  Electric  Commission:  "In  so  far  as 
it  provides  for  regulation  of  incorporations,  and  of  stock  and  bond 
issues,  it  is  a  wise  measure.  Otherwise,  its  provisions  are  violative 
of  Home  Rule.  Moreover,  the  commission  is  likely  in  years  to 
come  to  prove  merely  political,  and  will  probably  become  a  safeguard 
to  the  corporation  rather  than  a  protection  to  the  public."2 

"In  the  discussion  of  municipal  ownership  many  are  inclined  to 
reduce  the  question  to  the  basis  of,  does  it  pay?  can  the  com- 
munity produce  at  as  low  a  cost  as  the  private  corporation?  We 
have  attempted  to  discountenance  any  extension  of  the  public 
service  by  an  appeal  to  the  purse.  But  there  is  another  measure  of 
value  than  the  tax  rate,  another  standard  of  utility  than  money 
cost.  The  question  should  rather  be,  "does  municipal  ownership 
pay  in  a  higher  civic  morality,  an  aroused  public  sentiment,  a  union 
of  all  forces  against  corruption,  a  higher  standard  of  comfort,  a 
better  quality  of  service,  a  dearer  sense  of  the  city  ?"  Such  are  the 
standards  by  which  we  measure  all  other  expenditure;  such  is  the 
justification  of  our  police  and  fire  departments,  our  schools,  libraries, 
and  parks,  our  health,  streets,  and  charity  departments.  Municipal 
dividends  do  not  compare  in  importance  with  municipal  health  and 
well-being,  with  a  cleaner  home  environment,  an  enlarged  oppor- 
tunity for  life.  These  are  the  standards  by  which  every  public 
activity  is  to  be  measured,  and  in  these  regards  municipal  owner- 
ship has  justified  itself."3 — Howe. 

The  Relation  of  Public  Service  Corporations  to  the  Public. 
DELOS  F.  WILCOX,  Ph.  D. 

In  his  highly  valuable  work,  "Municipal  Franchises/'  Delos  F. 
Wilcox,  Ph.  D.,  formerly  Chief  of  the  Bureau  of  Franchises  of  the 
Public  Service  Commission  for  the  First  District  of  New  York, 
and  author  of  "The  American  City,"  "The  Study  of  City  Govern- 
ment," etc.,  most  ably  discusses  the  entire  question  of  franchises 

2.  Howe,   "The  City  the  Hope  of  Democracy,"  page   115. 

3.  "The  City,  the  Hope  of  Democracy,"  page  124. 


95 

and  the  relation  of  public  service  corporations  to  the  public.    From 
his  "Municipal  Franchises"  the  following  is  quoted:4 

"The  experience  of  American  cities  in  franchise  granting  makes 
a  dark,  but  instructive  chapter  in  the  political  and  business  history 
of  the  country.  ...  As  the  prosperity  of  the  companies  increases 
and  the  most  profitable  franchises  are  being  taken  up,  it  begins  to 
dawn  upon  the  political  parasites  of  the  cities  that  a  franchise  is 
worth  money.  There  are  attracted  to  the  council  chambers  unscru- 
pulous men  who  look  upon  political  power  as  a  means  of  self- 
enrichment  through  blackmail  and  bribery.  Then  a  new  epoch  in 
franchise  granting  is  ushered  in.  Meritorious  applications  are  re- 
ferred to  committees,  where  they  sleep  mysteriously.  Other  appli- 
cations with  apparently  less  in  their  favor,  are  recommended  by 
committees  and  passed  without  debate.  It  is  believed  that  in  many 
cities  the  use  of  corruption  funds  by  franchise  seekers  becomes,  at 
times,  so  habitual  that  bribery  is  regarded  as  almost  a  conventional 
offense.  This  condition  holds  during  the  long  period  between  the 
time  when  the  aldermen  learn  that  franchises  are  valuable  and  the 
time  when  the  people  at  large  learn  it.  The  stench  of  corruption 
and  the  gradual  recognition  that  municipal  franchises  are  monopo- 
lies, and  in  rapidly  growing  cities,  monopolies  of  great  value,  result 
in  a  demand  that,  not  the  aldermen,  but  the  taxpayers  at  large, 
should  receive  compensation  for  franchise  grants.  . . . 

Demand  for  Municipal  Ownership. 

"Even  indeterminate  franchises  and  almost  unlimited  powers  of 
public  regulation  have  sometimes  seemed  insufficient  to  protect,  in 
practice,  the  rights  of  the  public.  And  so,  in  recent  years,  a  power- 
ful and  wide-spread  demand  has  arisen  for  municipal  ownership  of 
public  utilities.  Some,  basing  their  argument  on  the  apparent 
inability  of  the  public  authorities  to  control  the  highways  so  long  as 
private  companies  are  permitted  to  place  and  maintain  as  their  own 
property  permanent  fixtures  in  the  streets,  have  urged  that  street 
railway  tracks,  gas  pipes,  conduits,  poles,  wires,  etc.,  should  be 
constructed  and  owned  by  the  city  and  be  leased  for  operation  to 
such  private  parties  as  would  agree  to  furnish  the  service  on  the 
best  terms.  Others,  foreseeing  endless  trouble  between  the  city  and 
the  lessees  of  its  property  under  the  plan  of  municipal  ownership 
and  private  operation,  have  gone  the  full  length  of  declaring  that 
public  utilities  are  essentially  public  enterprises  and  should  no  more 
be  farmed  out  to  private  contractors  than  the  schools,  the  police 
and  the  fire  service  are.  The  advocates  of  municipal  ownership 
and  operation  have  persistently  urged  that  only  by  following  this 
policy  could  the  people  effectually  eliminate  the  corruption,  ineffi- 
ciency, extortion,  stock  manipulation  and  other  evils  heretofore 
attaching  in  a  greater  or  less  degree  to  the  granting,  operation  and 

4.    Vol.  I,  pages  3-9. 


96 

ownership  of  public  utility  franchises.  This  view  has  had  a  marked 
effect  in  recent  times  upon  the  drafting  of  franchises  and  the 
framing  of  constitutions  and  charters.  Nowadays  it  has  become  a 
common  practice  to  reserve  in  franchise  grants  the  right  of  the  city 
to  purchase  the  property  of  the  grantee  either  at  the  expiration  of 
the  grant  or,  in  some  cases,  at  any  time.  . . . 

Franchises   Drafted   by    Those   Who   Seek   Them. 

"An  alderman  seldom  has  had  sufficient  experience  and  legal 
training  to  prepare  a  franchise  himself,  and  in  the  absence  of  some 
consistent  theory  of  franchise  policy,  he  has  permitted  the  attorneys 
for  public  service  corporations  to  draft  the  franchises  they  wanted 
and  present  them  to  him  for  approval.  ...  It  is  one  of  the  tricks 
of  the  public  service  corporation  lawyer,  to  draft  a  franchise  for  his 
client  so  that  the  powers  of  regulation  of  which  the  city  could  not 
be  deprived  in  any  case  appear  to  be  reserved  to  the  public  authori- 
ties in  the  most  explicit  terms,  and  this  reservation  is  pointed  out  to 
prove  how  liberal  to  the  city  the  company's  proposition  is.  When 
public  opinion  has  reached  such  a  state  that  the  corporation  asking 
for  a  franchise  foresees  the  necessity  of  making  concessions  on 
points  concerning  which  franchises  are  usually  silent,  the  expert 
attorney  introduces  clauses  making  extraordinary  reservations  to 
the  city,  which  further  on  in  the  franchise  are  so  limited,  checked 
and  modified  as  to  be  in  reality  worthless  from  the  public  stand- 
point. A  few  weasel  words  judiciously  distributed  at  strategic 
points,  a  few  omissions  easily  overlooked  in  the  ensemble  of  tech- 
nical phrases,  a  few  fairsounding  reservations  upon  which  law- 
suits in  the  Federal  courts  may  be  based,  are  likely  to  vitiate  any 
franchise  ordinance  or  contract  drafted  by  lawyers  who  are  paid 
to  outwit  the  city.  .  .  . 

Public  Authorities  Negotiate  in  the  Dark. 

"Until  very  recently  there  has  been  practically  no  publicity  of 
public  service  corporation  accounts.  Even  in  those  cases  in  which 
the  books  of  the  companies  have  been  open  either  to  the  city's 
financial  officer  or  to  other  accountants  for  the  purpose  of  deter- 
mining the  amount  of  gross  receipts  upon  which  the  companies 
were  required  to  pay  a  tax,  no  real  light  has  been  thrown  upon  the 
essentials  of  corporate  finance.  Access  to  the  books  showing  invest- 
ment and  cost  of  service  has  been  denied,  or  double  sets  of  books 
and  the  intricacies  of  accounting  have  concealed  the  most  essen- 
tial facts.  In  the  larger  cities  public  service  corporation  managers 
have  frequently  been  so  deeply  engaged  in  financial  jugglery  and 
the  manipulation  of  the  stock  market  that  they  themselves  have  been 
more  or  less  in  the  dark  as  to  the  exact  status  of  the  business  enter- 
prises for  which  they  were  nominally  responsible.  And  so,  when 


97 

franchise  negotiations  have  been  pending,  the  officers  representing 
the  city  have  had  nothing  to  base  their  claims  upon  except  the  de- 
sires of  the  public,  and  any  statistics  voluntarily  furnished  by  the 
other  parties  to  the  negotiations  have  been  ex  parte  evidence,  with 
no  guaranty  of  proper  book-keeping." 

The  Profits  of  Private  Monopoly. 
FRANK  PARSONS,  B.  C.  E.,  Ph.  D. 

Lecturer  in  Boston1  Law  School,  Author  of  "The  Railways,  the  Trusts  and  the  People," 

"The  Story  of  New  Zealand,"  "The  Telegraph  Monopoly,"  "The  City 

for  the  People,"  Etc. 

"Get  a  franchise,  issue  a  lot  of  stock,  keep  enough  of  it  to  retain 
control  of  the  enterprise,  sell  the  rest,  build  your  plant,  bond  it  for 
all  it  is  worth,  and  recoup  all  you  put  into  the  concern ;  then  double 
up  the  stock  and  keep  adding  to  it  as  the  business  grows,  so  that 
an  actual  profit  of  20,  50,  or  100  per  cent  on  the  real  investment 
will  be  only  5  or  6  or  7  per  cent,  on  the  bonds  and  stocks,  and  so 
appear  on  the  face  of  the  accounts  to  be  only  a  reasonable  profit, 
not  likely  to  arouse  opposition  or  set  in  motion  the  legislative  or 
administrative  machinery  for  the  reduction  of  the  rates — such  is 
the  normal  monopolistic  plan.  And  if  some  public  spirited  citizen 
should  stir  things  up  and  obtain  a  law  or  ordinance  or  order  reducing 
rates,  the  monopolist  can  take  the  matter  into  the  courts  and  protect 
his  extortions  in  large  degree  by  showing  that  much  of  the  bonds 
and  stocks  have  come  into  the  hands  of  'innocent  purchasers  for 
value/  wherefore  he  must  be  allowed  to  make  interest  and  dividends 
on  the  whole  capitalization,  else  the  said  innocent  holders  will  be 
cheated  out  of  a  fair  return  and  their  property  practically  con- 
fiscated, which  would  be  a  very  wicked  thing  if  it  were  caused  by 
legislative  reduction  of  rates  acting  on  a  condition  of  grievous 
capitalization,  but  is  perfectly  justifiable  if  caused  by  the  stock 
manipulation  or  the  profit-absorbing  tendencies  of  the  monopolist 
himself.  Water  in  the  capital  is  useful  also  in  protecting  the 
monopolist  from  public  ownership.  Dilute  the  figures  so  that  the 
profits  will  seem  quite  small  and  the  people  will  let  things  go  on 
till  the  business  pays  5  or  6  per  cent  or  more,  on  the  whole  capitali- 
zation, and  the  stock  rises  to  par  in  the  market,  water  and  all ;  then 
if  the  people  get  to  reading  'foolish'  books  on  public  questions,  or 
become  disgusted  with  corporate  monopolies  by  direct  experience, 
and  begin  to  demand  public  ownership  of  gas,  electric  light  works, 
or  street  railways,  or  whatever  line  you  may  be  in,  you  can  get  the 
legislature  to  pass  a  law  (if  it  has  not  already  done  so)  requiring 
that  cities  desiring  public  ownership  of  public  utilities  shall  buy  out 
existing  plants,  and  the  courts  will  make  the  cities  pay  full  market 
value,8  the  effect  of  which  will  be  to  keep  your  city  from  going 

5.    Value  based  on  fictitious  stocks  and  bonds. 


98 

into  public  ownership,  or  to  give  you  several  times  the  value  of  your 
plant  if  it  does. 

"The  New  York  Senate  investigation  of  1885  (Sen.  Doc.  41) 
brought  out  the  fact  that  'The  gross  sum  paid  for  the  past  ten  years 
by  the  gas  consumers  in  the  city  of  New  York  to  the  companies, 
irrespective  of  any  other  source  of  income  to  them,  was  $74,656,884. 
Of  this  amount  nearly  half  was  clear  profit,  viz.,  $30,074,715.  .  . . 
During  the  last  ten  years,  in  addition  to  cost  of  gas  and  10  per  cent 
on  the  share  or  nominal  capital  of  the  companies  named,  there  has 
been  paid  by  the  consumers  of  New  York  City  about  $9,000,000.  . . 
Taking  all  the  companies,  $4,941,000  have  been  paid  in  dividends 
in  excess  of  10  per  cent,  on  the  nominal  capital  in  ten  years,  and 
the  works  have  been  increased  out  of  the  earnings  to  the  extent 
of  $6,413,000.' — more  than  11  millions  above  10  per  cent  on  the 
nominal  capital,  water  and  all.  'If  the  10  per  cent  annual  dividends 
are  calculated  on  the  capital  actually  paid  in  by  the  stockholders,  it 
woud  appear  that  the  gas  consumers  in  ten  years  have  not  only  con- 
tributed such  10  per  cent  dividend,  but  a  further  amount  sufficient, 
in  fact,  to  nearly  duplicate  the  present  system  of  gas  supply.'  The 
dividends  on  stock  during  the  ten  years  were  in  nearly  all  cases  from 
8  to  35  per  cent,  in  spite  of  the  water  or  inflation,  which,  at  the  time 
of  the  investigation,  amounted  to  about  two-thirds  of  the  capitali- 
zation/' 

*     *     * 

"In  the  Cleveland  gas  case  the  evidence  showed  that  the  com- 
pany was  paying  cash  dividends  of  $1440  a  year  on  each  original 
investment  of  $1,000,  besides  stock  dividends  amounting  up  to  1892 
to  a  total  of  $24,000  for  each  investment  of  $1,000.  The  original 
investor  of  $1,000,  without  further  payment,  was  receiving  an  inno- 
cent looking  6  per  cent  on  the  $24,000  of  securities — 144  per  cent 
cash  profit  per  year  on  the  real  investment  and  a  gift  of  new 
securities  that  would  sell  in  the  market  for  more  than  $24,000." 

"When  John  Mcllhenny,  of  Philadelphia,  was  asked  in  court 
his  opinion  of  this,  he  said:  'That  is  not  an  unusual  thing  in  this 
growing  country  at  all.  It  is  about  the  history  of  all  the  prosperous 
gas  works."6 

Conclusions  Reached  by  Edmund  J.  James  Ph.  D.,  Now  President  of  the  Uni- 
versity of  Illinois,  in  His  Discussion  of  "The  Relation  of  the  Modem 
Municipality  to  the  Gas  Supply,"  as  Given  by  Him  in  a  Paper 
Read  Before  the  Philadelphia  Social  Science 
Association,   February,   1886. 

"I.  A  good  supply  of  pure  and  strong  gas  at  low  prices  has 
become  an  absolute  necessity  of  life  in  our  modern  city.  It  is 
necessary  to  the  comfort  of  the  home  as  well  as  to  the  efficiency 
of  industry  and  trade. 

6.    Parsons,  "The  City  for  the  People,"   pages  34-35. 


99 

"II.  The  technical  and  administrative  conditions  of  the  manu- 
facture and  distribution  of  gas,  make  the  business  a  practical 
monopoly. 

"III.  We  must  choose  then,  between  a  monopoly  managed  by  the 
public  in  the  interests  of  the  public,  and  a  monopoly  in  the  hands 
of  private  parties  who,  to  judge  from  all  experience,  will  fleece  the 
public  to  the  utmost  extent. 

"IV.  The  common  argument  against  the  public  management  that 
it  is  necessarily  more  expensive  than  private  management,  is  not 
well  grounded,  either  in  reason  or  in  fact,  since  a  careful  analysis  of 
the  case  shows  that  there  are  some  reasons  why  public  companies 
can,  as  a  rule,  manufacture  more  cheaply  than  private  companies, 
and  a  study  on  statistics  shows  that  public  companies  where  prop- 
erly organized  are  able  to  show  at  least  as  good  results  so  far  as 
cheapness  and  quality  of  manufacture  are  concerned  as  the  private 
companies. 

"V.  The  argument  that  if  private  works  manufacture  the  gas, 
they  will  not  take  part  in  politics  in  such  a  way  as  to  bring  about 
the  results  inevitably  connected  with  public  works,  is  not  well 
taken  either;  for  it  is  perfectly  possible  to  get  rid  of  the  worst 
effects  of  public  ownedship  by  a  properly  organized  civil  service, 
while  the  evil  is  not  remedied  by  transferring  the  management  of 
such  works  to  the  private  companies,  but  all  that  is  accomplished 
is  that  the  form  of  the  evil  is  changed.  The  private  companies  do 
not  go  out  of  politics,  on  the  contrary  they  devote  the  whole  of 
their  ability  to  the  attempt  to  avoid  the  restrictions  and  regulations 
which  the  public  must  in  pure  self-defense  impose.  They  go  into 
the  councils  and  into  the  legislatures  and  buy  up  councilmen  and 
legislators  in  the  most  shameless  way.  They  bribe  the  inspecting 
officers,  and  do  not  stop  at  anything  which  seems  to  promise  any 
assistance. 

"VI.  This  action  in  politics  is  very  evident  by  its  fruits  since  no 
country  in  the  world  has  been  able  to  secure  effective  supervision, 
which  has  not  at  the  same  time  been  fully  able  to  manage  the 
works  through  the  government.  It  is  idle  to  expect  to  be  able  to 
keep  the  companies  within  bounds.  The  only  way  is  to  assume  the 
management  by  the  city. 

"VII.  So  far  as  Philadelphia  is  concerned,  it  would  be  the 
grossest  folly  for  her  to  sell  the  gas  works.  The  property  is  of 
considerable  value,  and  no  company  would  propose  to  give  what  it  is 
really  worth.  We  are  now  ready  to  take  possession  of  the 
whole  works,  and  it  is  now  possible  for  the  first  time  in  our  history 
to  introduce  a  sensible  system  of  management.  To  sell  them  now 
would  be  to  hand  ourselves  over  soul  and  body  to  a  type  of  mon- 
opoly which,  wherever  it  has  been  able  to  establish  itself,  has  been 
peculiarly  obstinate  and  unscrupulous.  We  should  have  to  pledge 
ourselves  not  to  share  in  any  of  the  improvements  in  the  system 
of  lighting  for  the  period  of  the  charter.  We  should  have  to  give 


100 

up  all  idea  of  having  cheap  gas,  and  all  the  advantages  which  this 
boon  would  bring  with  it.  We  should  lose  a  valuable  source  of  in- 
come to  the  city.  There  is  no  reason  why  the  city  should  not  put 
the  price  very  low,  and  at  the  same  time  make  a  handsome  profit. 
By  handing  over  the  works  to  a  private  company,  we  should 
open  the  way  for  an  enormous  corrupting  machine  to  carry  on  its 
work  in  our  very  midst,  with  which  every  city,  both  in  this  country 
and  England,  has  proved  itself  unable  to  cope  and  give  up  a  system 
which  we  are  just  now  learning  how  to  control  so  as  to  get  rid  of 
the  worst  forms  of  abuse. 

"Let  us  put  it  another  way:  are  you  in  favor  of  paying  double 
prices  for  gas?  Then  vote  to  let  a  private  company  get  the  mon- 
opoly of  the  business.  Are  you  in  favor  to  agree  not  to  take  any 
advantage  of  any  new  discoveries  in  the  system  of  artificial  lighting 
for  the  next  twenty  years?  Then  vote  to  sell  the  gas  works  to  a 
private  company.  Are  you  in  favor  of  erecting  a  company  within 
the  city  whose  interest  it  will  be  to  join  hand  in  hand  with  every 
form  of  monopoly  which  now  curses  us?  Then  vote  to  start  a 
private  gas  company.  Are  you  in  favor  of  diminishing  the  interest 
which  the  citizens  now  feel  in  the  administration  by  taking  away 
the  most  important  functions?  Then  hand  over  to  a  private  com- 
pany the  business  of  looking  after  the  gas  supply.  Are  you  in  favor 
of  still  further  limiting  the  use  of  gas  and  thus  diminishing  the 
comfort  of  thousands  of  citizens?  Then  vote  to  hand  the  business 
over  to  a  private  company.  Are  you  in  favor  of  making  it  more 
difficult  for  Philadelphia  merchants  and  manufacturers  to  compete 
with  those  of  other  cities  and  countries  ?  Then  vote  to  deliver  them 
over  to  the  tender  mercies  of  a  private  monopoly. 

"On  the  other  hand,  if  you  would  like  to  see  low  prices  for  gas 
with  all  which  that  implies,  if  you  would  see  the  comfort  of  every 
house  in  Philadelphia  enormously  increased  by  the  general  applica- 
tion of  gas  to  heating,  cooking  and  manufacturing,  if  you  would 
like  to  be  in  a  position  to  avail  yourselves  within  twenty- four 
hours  of  all  improvements  in  the  system  of  gas  or  other  lighting, 
if  you  would  like  to  see  your  tax  bills  lower,  your  city  government 
become  more  economical,  if  you  would  see  every  interest  take  a 
greater  share  in  the  government  of  the  city,  if  you  would  like  to 
see  the  service  of  the  city  put  upon  a  non-partisan  basis,  then  by  all 
means  put  forth  all  your  effort  to  keep  the  city  from  doing  such 
a  foolish  thing  as  to  sell  this  very  valuable  franchise  and  to  bind 
herself  hand  and  foot  to  do  the  bidding  of  ^  still  another  unscru- 
pulous and  all  powerful  private  corporation." 


APPENDIX 

CONTINUED  SUCCESS  OF  MUNICIPAL  OWNERSHIP  IN  GREAT  BRITAIN  IN 
1918.  PUBLIC  SERVICE  PROFITEERS  IN  WAR  TIME.  PROFLIGACY  OF 
AMERICAN  RAILROAD  MANAGEMENT.  BELFONTAINE's  MUNICIPAL 
GAS  PLANT.  MODEL  CHARTER  PROVISIONS  RESPECTING  PUBLIC 

UTILITIES.      BRIEF "RESOLVED  THAT  PUBLIC  UTILITIES  SHOULD  BE 

PUBLICLY  OWNED  AND  OPERATED/'      CONSTITUTION  OF  THE  PUBLIC 
OWNERSHIP  LEAGUE  OF  AMERICA. 


CONTINUED  SUCCESS  OF  MUNICIPAL  'OWNERSHIP  IN 
GREAT  BRITAIN  IN  1917-18 

In  a  U.  S.  Consular  Commerce  report  entitled,  "Returns  of  Not- 
tingham's Municipal  Undertakings,"  under  date  of  June  4,  1918, 
United  States  Consul  C.  M.  Hitch  gives  interesting  information 
regarding  the  municipal  gas,  street  cars,  and  electric  plants,  all 
under  public  ownership.  From  this  report  the  following  facts 
appear : 

Nottingham  Municipal  Gas  Works 

Notwithstanding  the  fact  that  England  has  been  in  the  midst  of 
war  four  years,  the  price  of  the  best  coal  gas  has  not  risen  above 
68  cents  per  1,000  cubic  feet  to  domestic  consumers,  and  50  cents  to 
power  consumers,  and  yet  Nottingham  made  a  gross  profit  during 
the  past  year  on  its  gas  of  $787,060.  After  deducting  interest,  pay- 
ments into  the  "sinking  fund"  for  payment  of  the  plant,  and  "depre- 
ciation," there  still  remained  $477,235.  Of  this,  $150,000  was  placed 
in  the  city  treasury  to  reduce  taxation;  $150,000  was  placed  in  the 
"renewals  fund"  to  use  in  renewals  and  extensions  of  the  plant ;  and 
$175,000  was  placed  in  the  "reserve"  fund,  these  two  latter  funds 
being  in  certain  respects  investments  and  capable  of  being  loaned  in 
whole  or  in  part.  The  soundness  of  this  financing  (the  same  as 
prevails  in  Great  Britain  in  all  municipal  undertakings)  is  in  marked 
contrast  to  the  system  of  "frenzied  finance"  and  the  constant  in- 
crease of  stocks  and  bonds  and  other  forms  of  indebtedness  as 
practiced  in  the  United  States. 

The  quantity  of  gas  sold  during  the  year  was  2,244,670,300 
cubic  feet,  an  increase  of  159,538,700  cubic  feet  over  the  preceding 
year.  The  amount  of  gas  sold  per  ton  of  coal  carbonized  was 
12,004  cubic  feet,  as  compared  with  11,802  cubic  feet  for  the  pre- 
vious year.  These  results  show  increasing  efficiency  and  progress. 

Nottingham's  Municipal  "Tramways" 

This  municipal  street  car  system  during  the  year  carried  39,244,- 
107  passengers  (74^2  per  cent  of  the  total  number)  at  2-cent  fares, 
and  its  profits  were  $416,915  at  these  low  rates,  owing  to  the  hon- 


102 

esty  and  efficiency  of  the  management.  The  following  is  quoted 
verbatim  from  the  reports  referred  to: 

'The  Nottingham  Tramways  Committee,  in  its  statement  to  the 
city  for  the  year  ended  March  31,  1918,  reports  total  receipts  of 
$1,194,335,  which  is  an  increase  of  $178,560  over  the  previous  year. 
The  operating  expenses  were  $777,420  for  the  same  period,  which 
is  an  increase  of  $88,835.  There  was  a  decrease  in  the  cost  of 
maintenance,  compensation,  law  charges,  and  for  miscellaneous  ex- 
penses amounting  to  $12,620.  In  consequence  of  the  serious  short- 
age of  labor  and  material,  it  was  not  possible  to  carry  out  perma- 
nent-way renewals  to  any  considerable  extent,  the  amount  expended 
therefor  being  $12,125. 

"The  miles  traveled  by  the  cars  during  the  year  totaled  3,776, 
225,  an  increase  of  9,864  miles  as  compared  with  the  previous  year. 
The  average  number  of  cars  in  service  rose  from  116  to  119  per  day. 
Passengers  carried  numbered  52,690,881,  being  an  increase  of  5,209,- 
947.  Of  the  total  number  of  passengers  carried,  39,244,107  were 
the  ordinary  2-cent  fares,  or  74^2  per  cent  of  the  total.  The  ordi- 
nary 2-cent  fares  were  increased  to  3  cents  beginning  April  1. 

"After  deducting  all  of  the  operating  expenses,  there  was  a  net 
balance  of  $416,915,  which  was  disposed  of  as  follows:  Interest  on 
stock  and  loans,  $83,190;  repayment  of  capital,  $120,870;  reserve 
and  renewals  fund,  $122,835 ;  reserve  accident  fund,  $10,000 ;  and 
the  remainder,  $80,000,  was  applied  to  the  district  tax  rate." 

II 

PUBLIC  SERVICE  PROFITEERS  IN  WAR  TIME 

The  Increased  Shameless  Injustice  of  the  Public  Service  Corporations  Who 
Are  Using  the  War  as  an  Excuse  to  Further  Augment  Their  Profits 

It  is  well  known  to  those  who  have  investigated  the  promotion 
and  finances  of  the  public  service  corporations,  that  in  practically 
every  case  where  their  finances  are  precarious  it  is  due  to  fictitious 
capitalization,  mismanagement,  extravagance,  and  dishonest  ac- 
counting, and  not  because  the  former  charges  to  the  public  are  in- 
sufficient for  operating  purposes  and  fair  profits,  if  these  companies 
were  honestly  managed. 

Many  of  these  companies  have  been  making  even  larger  profits 
than  before  the  war,  because  of  increased  business,  and  in  the  case 
of  gas  companies  because  of  the  higher  prices  they  receive  for  their 
by-products.  Why  then  are  they  so  urgently  pressing  their  de- 
mands for  increased  charges?  Simply  by  increased  profits  to  ad- 
vance the  earning  power  of  their  capital,  and  on  the  strength  of 
this  to  again  inflate  their  stocks  and  bonds,  and  dispose  of  them 
to  the  public,  while  they,  the  promoters  and  financiers,  having  dis- 
posed of  their  watered  securities  can  saddle  the  defense  of  their 
illegal  acts  and  the  accompanying  losses,  upon  the  defrauded  in- 
vestors. Indeed,  the  gas  companies  and  other  public  service  cor- 
porations had  already  before  the  war,  practiced  so  much  dishonesty 


103 

in  their  financing;  and  their  directors  had  embezzled  so  much  of 
the  stockholders'  money  by  dishonest  accounting,  that  many  and 
probably  the  great  majority  would  have  been  found  on  the  verge 
of  bankruptcy,  had  their  accounts  been  fully  and  fearlessly  inves- 
tigated. The  rates  charged  the  public  were  more  than  adequate 
under  honest  management,  but  no  rate  could  be  made  high  enough 
to  satisfy  the  cravings  of  the  profiteer  directors. 

A  clear  distinction  must  be  made  between  the  companies  and 
publicly  owned  utilities.  In  extremely  few  cases  relatively  have  the 
latter  raised  their  rates;  and  in  practically  all  these  cases  the  rates 
were  lower  than  those  of  the  companies;  and  the  cities  desired  to 
increase  the  earnings  to  be  used  for  the  "common  good."  In  like 
manner,  the  national  government  has  increased  railroad  rates,  to 
secure  additional  revenues  for  war  purposes. 

To  illustrate  the  case  of  the  gas  companies,  and  their  demand 
for  increased  rates.  Before  the  war  the  Michigan  Light  Co.,  which 
controls  the  gas,  electricity  and  street  railways  in  many  cities,  sold 
its  coke  (a  by-product  of  the  gas  works)  at  an  average  price  of 
about  $5.85  per  ton,  when  its  coal  cost  about  $3.00  per  ton.  Since 
then  its  coal  costs  about  $2.00  per  ton  more,  but  it  demands  about 
$4.00  per  ton  more  for  coke.  As  there  is  produced  from  a  ton  of 
coal  about  1,200  Ibs.  of  coke,  this  brought  when  coal  cost  $3.00  per 
ton,  approximately  $3.50,  or  50  cents  more  than  the  entire  ton  of 
coal;  and  when  coal  advanced  to  $5.00,  the  company  demanded 
about  $9.50  per  ton  of  coke,  or  $5.70  for  the  coke  from  a  ton  of 
coal,  being  joe  more  than  the  entire  ton  of  coal  cost,  before  the 
gas  and  other  residuals  were  extracted!  In  addition  to  this,  the  am- 
monia, coal  tar,  etc.,  are  sold  at  increased  prices. 

Ill 

THE     PROFLIGACY     OF    THE     AMERICAN     RAILROADS     UNDER 
PRIVATE  OWNERSHIP. 

If  the  above  charges  of  dishonest  management  seem  to  some 
readers  too  severe,  let  them  read  carefully  the  conclusions  of  the 
Interstate  Commerce  Commission,  reporting  the  dishonest  methods 
of  the  directors  of  six  of  the  great  American  railway  systems, 
covering  over  fifty  thousand  miles  of  railway,  which  in  every  case 
were  found  to  violate  the  laws  of  every  state  through  which  they 
passed;  bribe  legislators  and  other  public  officials,  bribe  and  con- 
trol the  press;  control  politics;  all  being  done  by  illegal  use  of  the 
stockholders'  money;  embezzlement  of  stockholders'  money,  and 
the  falsifying  and  burning  of  their  accounts  to  hide  their  illegal 
acts.  A  fair  example  of  the  profligacy  and  dishonesty  with  which 
all  these  roads  were  managed,  and  which  fairly  represent  many 
gas,  electric  and  street  railway  companies  under  private  ownership, 
is  shown  in  the  following  extracts  from  the  "Official  Report  No. 
6569  of  the  Interstate  Commerce  Commission,  "respecting  the 
financial  transactions  of  the  New  York,  New  Haven  and  Hartford 
R.  R.,  July  11,  1914,"  in  which  it  is  shown  that  the  directors  wasted 


104 

through  fraud  and  extravagance  $60,000,000  to  $90,000,000  of  the 
stockholders'  money.  The  committee  say  on  pages  32-35: 

"Public  hearings  were  held  extending  over  a  period  of  60  days 
of  almost  continuous  session.  Witnesses  in  a  position  to  have 
knowledge  of  the  transactions  under  scrutiny  were  examined.  In 
the  search  for  truth  the  Commission  had  to  overcome  many  ob- 
stacles, such  as  the  burning  of  books,  letters,  and  documents  and 
the  obstinacy  of  witnesses  who  declined  to  testify  until  criminal 
proceedings  were  begun  for  their  refusal  to  answer  questions.  The 
New  Haven  system  has  more  than  300  subsidiary  corporations,  in 
a  web  of  entangling  alliances  with  each  other,  many  of  which  were 
seemingly  planned,  created,  and  manipulated  by  lawyers  expressly 
retained  for  the  purpose  of  concealment  or  deception. 

"The  result  of  our  research  into  the  financial  workings  of  the 
former  management  of  the  New  Haven  system  has  been  to  disclose 
one  of  the  most  glaring  instances  of  maladministration  revealed  in 
all  the  history  of  American  railroading.  In  the  course  of  the  in- 
vestigation many  instances  were  uncovered  of  violation  of  the  laws 
of  different  states. 

'The  difficulties  under  which  this  railroad  system  has  labored 
in  the  past  are  internal  and  wholly  due  to  its  own  mismanagement. 
Its  troubles  have  not  arisen  because  of  regulation  by  governmental 
authority.  Its  greatest  losses  and  most  costly  blunders  were  made 
in  attempting  to  circumvent  governmental  regulation  and  to  extend 
its  domination  beyond  the  limits  fixed  by  law." 

"The  subject  matter  of  this  inquiry  relates  to  the  financial  op- 
eration of  a  railroad  system  which,  on  June  30,  1903,  had  a  total 
capitalization  of  approximately  $93,000,000,  of  which  $79,000,000 
was  stock  and  $14,000,000  bonds.  In  the  ten  years  from  June  30, 
1903,  this  capitalization  was  increased  from  $93,000,000  to  $417,- 
000,000,  exclusive  of  stock  premiums,  or  an  increase  of  $324,- 
000,000.  The  financial  operations  necessary  for  these  acquisitions, 
and  the  losses  which  they  have  entailed,  have  been  skillfully  con- 
cealed by  the  juggling  of  money  and  securities  from  one  subsidiary 
corporation  to  another. 

"Significant  Incidents" 

"Marked  features  and  significant  incidents  in  the  loose,  extrava- 
gant, and  improvident  administration  of  the  finances  of  the  New 
Haven  as  shown  in  this  investigation  are  the  Boston  &  Maine  de- 
spoilment; the  iniquity  of  the  Westchester  acquisition;  the  double 
price  paid  for  the  Rhode  Island  trolleys;  the  recklessness  in  the 
purchase  of  Connecticut  and  Massachusetts  trolleys  at  prices  ex- 
orbitantly in  excess  of  their  market  value;  the  unwarranted  ex- 
penditure of  large  amounts  in  "educating  public  opinion ;"  the  dis- 
position, without  knowledge  of  the  directors,  of  hundreds  of  thou- 
sands of  dollars  for  influencing  public  sentiment ;  the  habitual  pay- 
ment of  unitemized  vouchers  without  any  clear  specification  of  de- 
tails; the  confusion  inter-relation  of  the  principal  company  and  its 


105 

subsidiaries  and  consequent  complication  of  accounts;  the  practice 
of  financial  legerdemain  in  issuing  large  blocks  of  New  Haven 
stock  for  notes  of  the  New  England  Navigation  Company,  and 
manipulating  these  securities  back  and  forth;  fictitious  sales  of 
New  Haven  stock  to  friendly  parties  with  the  design  of  boosting 
the  stock  and  unloading  on  the  public  at  the  higher  "market  price ;" 
the  unlawful  diversion  of  corporate  funds  to  political  organizations ; 
the  scattering  of  retainers  to  attorneys  of  five  states,  who  rendered 
no  itemized  bills  for  services  and  who  conducted  no  litigation  to 
which  the  railroad  was  a  party;  extensive  use  of  a  paid  lobby  in 
matters  as  to  which  the  directors  claim  to  have  no  information; 
the  attempt  to  control  utterances  of  the  press  by  subsidizing  re- 
porters; payment  of  money  and  the  profligate  issue  of  free  passes 
to  legislators  and  their  friends;  the  investment  of  $400,000  in  se- 
curities of  a  New  England  newspaper;  the  regular  employment  of 
political  bosses  in  Rhode  Island  and  other  states,  not  for  the  pur- 
pose of  having  them  perform  any  service  but  to  prevent  them,  as 
Mr.  Mellen  expressed  it,  from  becoming  active  on  the  other  side ;" 
the  retention  by  John  L.  Billard  of  more  than  $2,700,000  in  a  trans- 
action in  which  he  represented  the  New  Haven  and  into  which  he 
invested  not  a  dollar;  the  inability  of  Oakleigh  Thorne  to  account 
for  $1,032,000  of  the  funds  of  the  New  Haven  intrusted  to  him 
in  carrying  out  the  Westchester  proposition ;  the  story  of  Mr.  Mel- 
len as  to  the  distribution  of  $1,200,000  for  corrupt  purposes  in 
bringing  about  amendments  of  the  Westchester  and  Port  Chester 
franchises;  the  domination  of  all  the  affairs  of  this  railroad  by 
Mr.  Morgan  and  Mr.  Mellen  and  the  absolute  subordination  of 
other  members  of  the  board  of  directors  to  the  will  of  these  two; 
the  unwarranted  increase  of  the  New  Haven  liabilities  from  $93,- 
000,000  in  1903  to  $417,000,000  in  1913 ;  the  increase  in  floating 
notes  from  nothing  in  1903  to  approximately  $40,000,000  in  1913 ; 
the  indefensible  standard  of  business  ethics  and  the  absence  of 
financial  acumen  displayed  by  eminent  financiers  in  directing  the 
destinies  of  this  railroad  in  its  attempt  to  establish  a  monopoly  of 
the  transportation  of  New  England.  A  combination  of  all  these 
has  resulted  in  the  present  deplorable  situation  in  which  the  affairs 
of  this  railroad  are  involved." 

In  the  case  of  the  Chicago,  Rock  Island  and  Pacific  R.  R.  Sys- 
tem, the  Interstate  Commerce  Commission's  Report,  No.  6834,  June 
5,  1915,  it  is  shown  on  pages  47-49,  that  nine  officers  drew  salaries 
varying  from  $32,000  to  $75,000  each,  and  one  officer,  L.  F.  Loree, 
Chairman  of  the  Executive  Committee,  who  was  drawing  $75,000 
salary,  was  given  from  the  stockholders'  money  a  bonus  of  $450,000 
if  he  resign  at  the  end  of  ten  months.  Several  of  the  directors 
took  large  sums  of  the  stockholders'  money  from  time  to  time  for 
their  private  use,  without  rendering  any  account  to  the  company. 

The  above  are  fair  examples  of  public  utility  financing  under 
private  ownership  in  the  U.  S.  They  surpass  in  extent,  and  rival 
in  iniquity  the  acts  of  the  "buccaneers"  of  old. 


106 

IV 
BELLEFONTAINE'S  NEW  MUNICIPAL  PLANT  NOW  IN  OPERATION 

The  Success  Attending  Municipal  Ownership  in  Bellefontaine,  Ohio,  Is  Fol- 
lowed by  the  Opening  of  an  Enlarged  and  Modern  Gas  Plant  in  July, 
1918.     A  Detailed  Description  of  This  New  Municipal  Plant. 

The  following  is  taken  from  the  "American  Gas  Engineering 
Journal,"  of  July  20,  1918,  and  since  it  gives  many  details  of  con- 
struction, equipment  and  processes,  should  be  of  value  to  officers 
of  cities  contemplating  municipal  plants: 

The  new  Municipal  Coal  Gas  Plant,  located  on  the  Jesse  M. 
Dowell  property  and  the  Big  Four  Railroad,  Bellefontaine,  Ohio, 
was  put  in  operation  July  5. 

The  board  of  public  service  of  Bellefontaine  has  realized  for 
some  time  past  that  the  Water  Gas  Plant  was  inadequate  with  re- 
gard to  its  capacity,  and  in  the  latter  part  of  1916  took  up  for  se- 
rious consideration  the  construction  of  a  new  gas  plant  to  take  care 
of  the  requirements  of  the  city. 

Clair  A.  Inskeep,  director  of  public  service  and  acting  in  ac- 
cordance with  Mayor  Kennedy,  took  up  the  investigation  of  the 
proposed  plant,  having  in  mind  that  another  water  gas  plant  con- 
structed along  modern  lines  would  best  meet  the  requirements. 

After  thorough  investigation,  it  was  decided  that  owing  to  the 
high  cost  of  coke  and  the  rapidly  increasing  price  of  oil,  used  in 
making  water  gas  that  it  would  be  impossible  to  manufacture  water 
gas  excepting  at  prohibitible  cost  to  the  user,  so  that  other  types 
of  plants  were  then  considered,  and  a  coal  gas  plant  was  decided 
by  them  as  the  logical  solution  of  the  problem. 

City  officials,  realizing  the  responsibility  placed  upon  them  in 
reaching  this  decision,  considered  it  proper  to  secure  the  services 
of  engineers  of  experience  and  standing  before  proceeding  with 
the  work  along  lines  as  had  been  dictated,  and  in  this  connection 
secured  the  services  of  Professor  McCracken,  engineer  of  the  Ohio 
State  University,  of  Columbus,  Ohio,  and  G.  Herman  Gamper. 

These  engineers,  after  a  careful  survey  of  the  situation,  entirely 
agreed  with  the  opinion  of  the  city  officials,  and  then  proceeded  to 
draw  up  plans  and  specifications  for  the  installation,  after  which 
bids  were  advertised  and  contracts  placed  with  D.  W.  McGrath 
Company,  of  Columbus,  Ohio,  for  the  grading,  foundations  and 
buildings,  and  with  the  Gas  Machinery  Company,  of  Cleveland, 
Ohio,  for  the  gas  benches,  gas  works  apparatus,  purifiers  and  am- 
monia plant. 

Considerable  of  the  material  used  was  secured  in  Bellefontaine, 
the  McGrath  Company  making  contracts  with  the  Bellefontaine 
Bridge  Company  for  the  structural  steel  used  in  the  building  con- 


107 

struction,  and  the  Gas  Machinery  Company  likewise  having  consid- 
erable dealings  with  the  bridge  company  as  well  as  other  business 
concerns  in  Belle fontaine. 

The  contract  for  the  new  plant  was  made  May  24,  1917,  at  which 
time  it  was  anticipated  that  the  plant  would  be  completed,  ready 
for  making  gas,  within  one  year. 

The  unprecedented  cold  weather  of  the  past  winter  delayed  the 
building  construction,  which  necessarily  had  to  be  completed  before 
the  apparatus  could  be  installed,  but  even  with  the  handicap  caused 
by  this  delay,  the  plant  is  now  producing  gas,  being  completed  only 
about  five  or  six  weeks  later  than  first  contemplated.  The  formal 
starting  of  the  plant  was  attended  by  Mayor  Kennedy,  Director  of 
Public  Service  Inskeep,  Service  Director  Hiatt  and  other  public 
officials,  representing  Bellefontaine,  beside  a  large  number  of  pub- 
lic-spirited citizens. 

Professor  McCracken  and  Mr.  Camper,  the  engineers  from 
Columbus,  were  also  present  to  see  the  thing  start  off  in  proper 
shape,  and  the  Gas  Machinery  Company  was  represented  by  Henry 
Schremser,  its  construction  and  operating  engineer,  who  is  at  pres- 
ent in  active  charge  of  the  plant,  and  also  C.  H.  Printz,  from  the 
Cleveland  office. 

The  plant  as  completed  represents  the  last  word  in  the  art  for 
gas  plants  of  the  size  proper  for  supplying  needs,  due  consideration 
being  given  in  all  details  to  extension  of  the  plant  to  take  care  of 
the  rapidly  increasing  demand. 

The  retorts  in  which  the  coal  is  coked  are  made  of  silica  ma- 
terials to  withstand  the  high  temperature,  and  are  placed  in  settings 
of  six  retorts  each,  each  setting  being  heated  by  a  coke  fire  gener- 
ator or  furnace  of  a  recuperative  type  so  that  the  spent  gases  pas- 
sing from  the  benches  are  utilized  to  superheat  the  primary  and 
secondary  air  used  in  connection  with  the  producer  fire  for  main- 
taining temperature  in  the  benches  ranging  from  2,000  to  2,500 
deg.  Fahr. 

The  speed  at  which  these  benches  are  operated  is  dependent 
upon  the  temperature  maintained  and  the  weight  of  the  coal 
charged,  and  varies  from  four-hour  periods  to  eight-hour  periods. 

The  coal  is  charged  into  these  retorts  from  the  charging  buggies 
by  means  of  scoops,  and  the  men  handling  these  coal  scoops  dis- 
tribute coal  equally  throughout  the  length  of  the  retorts. 

After  the  coal  has  been  in  the  retorts  the  proper  time  to  insure 
thorough  distillation,  the  coke  which  is  left  after  the  gas  and  other 
vapors  have  been  driven  from  the  coal  is  pushed  from  the  retorts 
by  hand-operated  pushing  machines  and  discharged  into  receiving 
hoppers  supported  from  the  floor  in  the  rear  of  the  benches,  where 
it  is  quenched  by  means  of  water  sprayed  onto  the  outside  surfaces 
of  the  coke,  which  water,  of  course,  immediately  vaporizes,  form- 
ing steam,  which  acts  as  the  principal  quenching  and  cooling  agent 
for  the  hot  coke. 


108 

After  the  coke  is  discharged,  the  rear  mouthpiece  door  of  the 
retort  is  closed  and  a  fresh  charge  of  coal  shoveled  into  the  retort, 
after  which  the  front  door  is  then  sealed  and  the  gas-making  proc- 
ess continued. 

The  new  plant  contains  four  benches,  each  bench  consisting  of 
six  retorts,  and  the  charge  of  coal  is  varied  from  400  to  600  lb., 
according  to  the  demands  of  the  plant,  the  condition  of  the  heats 
of  the  benches  and  other  operating  features  which  must  be  care- 
fully considered. 

From  every  ton  of  coal  charged  into  the  retorts  it  is  estimated 
that  there  will  be  produced  10,000  cu.  ft.  of  gas,  10  gal.  of  tar,  4^ 
Ibs.  of  ammonia  and  about  1,300  Ibs.  of  coke,  about  300  Ibs.  of  which 
is  required  to  heat  the  benches  for  each  ton  of  coal  carbonized. 

The  gas,  tar  and  ammonia  all  pass  in  vapor  form  through  the 
ascension  or  standpipes  into  the  hydraulic  mains  which  are  provided 
with  a  water  seal  to  prevent  the  return  of  the  gas  to  the  retorts 
when  the  lids  are  opened  for  discharging  the  coke  and  refilling  with 
coal. 

It  is  essential  that  the  gas  be  taken  from  the  hydraulic  mains  as 
rapidly  as  it  is  produced  in  order  that  no  back  pressure  may  be 
caused  in  the  retorts  which  would  result  in  a  loss  of  gas  made,  as 
the  same  would  leak  through  the  walls  of  the  retorts  into  the  com- 
bustion chambers,  where  the  furnace  gas  is  burned  for  heating  the 
retorts,  and  consumed  there. 

In  order  to  draw  the  gas  from  the  hydraulic  mains,  an  exhauster 
of  the  positive  blower  type  is  provided  which  machine  is  driven 
by  a  steam  engine. 

As  the  amount  of  gas  made  fluctuates  from  time  to  time,  owing 
to  the  freshness  of  new  charges  or  retorts  being  opened  for  dis- 
charging and  filling,  it  is  necessary  that  this  exhauster  shall  be 
driven  at  proper  speed  to  maintain  a  practical  constant  inlet  pres- 
sure at  the  exhauster  regardless  of  the  volume  of  gas  made. 

This  regulation  is  secured  by  means  of  a  gas  float  actuated  by 
a  steam  regulating  valve  at  the  exhauster  engine,  so  that  the  ma- 
chine automatically  increases  or  reduces  its  speed  according  to  the 
demands  reflected  from  the  gas  float,  which  is  in  turn  connected 
to  the  main  gas  inlet  pipe  leading  to  the  exhauster. 

The  gas,  when  it  passes  the  exhauster,  is  heated,  and  in  order 
to  recover  the  tarry  and  other  liquids  carried  in  vapor  form,  the 
gas  is  cooled  after  passing  the  exhauster  in  condensers. 

This  condenser  is  a  large  steel  tank  6  ft.  in  diameter  and  19  ft. 
high,  and  is  fitted  with  a  large  number  of  3-in.  tubes. 

The  gas  passes  inside  of  the  shell  but  around  the  tubes,  and 
water  passes  through  the  tubes,  flowing  in  the  opposite  direction 
to  the  passage  of  the  gas,  so  that  the  gas  is  rapidly  reduced  in 
temperature  to  about  60  deg.  Fahr.,  to  permit  the  proper  recovery 
of  tar  and  ammonia. 

The  next  apparatus  in  series  is  a  tar  and  ammonia  washer, 


109 

which  is  a  cast-iron  vessel  provided  with  baffle  plate  at  the  inlet 
of  the  gas,  which  baffle  plate  connects  to  a  number  of  horizontal 
inverted  U-shaped  ducts  which  are  provided  with  serrated  edges. 

The  lower  edge  of  these  ducts  is  immersed  in  water,  and  the 
gas  is  obliged  to  bubble  through  the  water  in  minutely  divided 
streams  caused  by  the  serrated  edges,  which  arrangement  insures 
thorough  washing  of  gases. 

The  tar  is  partly  condensed  from  the  gas  in  the  condenser  above 
described,  and  the  remaining  injurious  tar  is  removed  in  the  tar 
and  ammonia  washer  by  active  contact  with  the  washing  liquid. 

After  the  tar  and  ammonia  washer  is  located,  the  ammonia 
scrubber,  which  is  a  large  steel  shell  placed  in  vertical  position, 
and  the  inside  of  which  is  filled  with  wooden  grids. 

The  gas  enters  the  scrubber  at  the  bottom  of  these  grids  and 
passes  upward  to  the  outlet  gas  connection  near  the  top  of  the 
shell,  and  during  the  passage  of  gas  through  this  shell  it  is  sub- 
jected to  intimate  contact  with  the  wetter  grids,  the  water  being 
fed  into  the  top  of  the  scrubber  by  an  automatic  flushing  arrange- 
ment to  insure  thorough  saturation  of  the  gas. 

The  function  of  this  scrubber  is  to  remove  the  ammonia  from 
the  gas  and  water,  which  has  a  strong  affinity  for  ammonia,  is  used 
as  the  scrubbing  agent. 

From  the  scrubber  the  gas  passes  to  two  large  purifiers,  which 
are  located  on  the  site  of  the  old  gas  plant. 

These  purifiers  are  each  15  ft.  in  diameter  and  12  ft.  in  height, 
and  built  for  a  divided  gas  flow  to  insure  maximum  efficiency. 

Each  purifier  is  fitted  with  two  layers  of  trays  suitably  sup- 
ported, and  on  these  trays  is  placed  the  oxide  through  which  the 
gas  passes  to  remove  the  sulphurated  hydrogen  and  other  injurious 
impurities. 

This  oxide,  which  is  frequently  referred  to  as  iron  sponge,  is 
made  of  fine  cast-iron  borings  thoroughly  oxidized  and  planer  chips 
to  make  the  material  porous  and  permit  passage  of  gas  without 
excessive  back  pressure. 

After  the  gas  passes  the  purifiers  it  goes  through  a  station 
meter  to  permit  measuring  the  total  amount  of  gas  produced. 

From  the  station  meter,  the  gas  passes  into  the  main  gas  storage 
holder,  which  is  the  only  part  of  the  old  plant  that  is  used  in  con- 
nection with  the  making  of  coal  gas. 

The  demands  on  the  gas  plant  have  grown  to  such  an  extent 
that  the  pipe  lines  are  inadequate  to  supply  the  service  during  hours 
of  excess  demand,  when  depending  entirely  upon  the  holder  pres- 
sure, and  in  order  to  improve  the  quality  of  service  the  new  plant 
is  provided  with  a  high-pressure  booster,  which  will,  when  oper- 
ated, increase  the  pressure  on  the  street  mains,  and  thereby  suf- 
ficiently increase  the  amount  of  gas  which  they  pass  to  insure  an 
adequate  supply  at  all  hours. 


110 

This  booster  will  only  be  operated  during  hours  of  peak  de- 
mands. 

All  of  the  apparatus  is  connected  together  by  means  of  ten  cast- 
iron  pipes,  and  each  piece  of  machinery  is  also  provided  with  by- 
pass valve  connections  so  as  to  permit  shutting  down  any  individual 
piece  without  interfering  seriously  with  the  operation  of  the  plant 
for  the  time  necessary  to  make  replacements  or  repairs. 

The  water  which  is  used  in  the  washer  and  scrubber  for  treat- 
ing the  gas  passes  into  a  large  concrete  sealed  tank  or  basin,  and 
ammonia  contained  in  same  is  then  treated  in  an  ammonia  con- 
centrator or  still  so  as  to  prepare  this  product  for  the  market. 

The  concentrated  liquor  as  it  comes  from  the  still  is  stored  in 
a  larq^e  steel  tank  of  12,000  gal.  capacity  until  a  sufficient  amount 
has  been  made  to  permit  shipment  to  the  refiners  in  tank  cars. 

The  tar  which  is  recovered  at  various  points  throughout  the 
plant  passes  into  a  large  receiving  well,  where  it  is  stored  until 
shipment  is  made. 

For  the  operation  of  the  exhauster  engine,  tar  and  liquor  pumps 
and  ammonia  concentrator,  a  considerable  amount  of  steam  is  re- 
quired. To  provide  for  same,  the  plant  is  equipped  with  duplicate 
boilers  so  as  to  insure  an  adequate  supply  at  all  times,  not  only 
for  the  operation  of  the  plant,  but  for  the  heating  of  the  buildine 
and  the  water  in  the  gas  storage  holder  tanks  during  the  cold 
weather. 

The  coke  used  in  the  generators  for  heating  the  retorts  is  han- 
dled directly  from  the  retorts  by  means  of  a  hot  coke  chute,  which 
operates  on  overhead  tracks  feeding  directly  into  the  furnaces,  thus 
assuring  highest  efficiency  from  the  coke  used  for  this  purpose. 

The  coke  which  is  not  required  in  the  operation  of  the  plant 
will  be  sold  to  the  public  of  Bellefontaine. 

The  coke  which  is  made  for  sale,  after  being  quenched  in  the 
quenching  chutes,  is  discharged  into  industrial  cars,  which  are  pro- 
pelled by  means  of  cable  haul  to  a  high  coke  trestle. 

These  cars  are  equipped  with  automatic  dumping:  doors,  so  that 
the  operator  at  the  furnace  floor  will  be  able  to  discharge  cars  at 
any  point  desired  within  the  limits  of  the  trestle,  and  it  is  probable 
that  within  a  short  time  a  screening  plant  will  be  provided  for 
cleansing  and  sorting  the  various  sized  coke. 

The  plans  prepared  for  this  plant  contemplate  at  a  future  time 
the  installation  of  a  coal-handline  apparatus  for  minimizing  the 
labor  in  unloading  the  cars  of  coal  as  they  may  be  received  and 
D^acine  the  coal  in  storaee,  and  provision  is  also  made  in  the  exist- 
ing retort  house  by  the  installation  of  an  extra  arch  for  six  addi- 
tional retorts,  and  this  generating  capacity  may  be  still  further  ex- 
tended by  the  addition  of  other  benches  as  they  may  be  required 
from  time  to  time  until  the  present  capacity  of  the  plant  is  more 
than  doubled. 


Ill 

The  retort  house  is  of  steel  framing,  the  sides  and  roof  being 
covered  with  corrugated  asbestos  cement. 

The  design  of  this  building  represents  the  most  advanced  ideas 
of  retort-house  buildings,  insuring  well-lighted  and  well-ventilated 
working  quarters  for  the  men,  offering  unusual  facilities  for  ex- 
tension, and  being  absolutely  fireproof  and  practically  indestructible. 

All  floors  within  the  building  are  neatly  and  substantially  paved 
with  cement. 

V 

MODEL  PROVISIONS  RESPECTING  FRANCHISES  AND  THE  CON- 
TROL OF  PUBLIC  UTILITIES  IN  THE  NEW  CHARTER 
OF  THE  CITY  OF  KALAMAZOO 

The  injustice  under  which  the  people  of  Kalamazoo  suffered 
from  the  domination  of  the  city  by  the  public  utility  companies 
finally  resulted  in  public  meetings  and  conferences  of  the  most  pro- 
gressive citizens.  Some  of  the  best  experts  of  the  country  were 
employed  to  investigate  the  situation  and  to  become  informed  con- 
cerning various  progressive  measures  adopted  by  other  leading 
cities.  They  also  came  in  touch  with  the  most  desirable  literature 
on  civic  administration. 

Meantime  a  "New  Charter  League"  was  formed  for  the  purpose 
of  revising  the  existing  charter  and  presenting  necessary  amend- 
ments to  the  people  for  ratification.  It  soon  became  apparent  that 
progress  could  be  made  most  easily  by  making  an  entirely  new 
charter  which  was  adopted  by  unanimous  vote  of  the  "Charter 
Commission,"  October  15,  1917  and  approved  by  the  governor  the 
same  month.  This  charter  was  presented  to  the  people  for  their 
adoption  or  rejection  at  a  special  election  February  4,  1918,  after 
its  provisions  had  been  thoroughly  discussed  through  the  press  and 
at  numerous  public  meetings.  The  vote  resulted  in  the  unanimous 
adoption  of  the  new  charter. 

The  city  now  has  a  commission  form  of  government  with  six 
commissioners  and  a  city  manager  in  the  place  of  the  former  ad- 
ministration by  a  mayor  and  board  of  aldermen.  Although  only 
a  few  months  have  elapsed  since  the  inauguration  of  the  new  sys- 
tem, tremendous  progress  has  been  manifested  in  that  the  city  is 
now  practically  free  from  the  old  regime  of  ignorant,  inefficient, 
and  often  corrupt  rule  for  which  the  public  service  corporations 
had  at  times  been  responsible. 

The  author  recommends  that  cities  contemplating  a  charter  revi- 
sion procure  copies  of  this  charter  for  examination,  it  having  been 
the  result  of  long  and  careful  study  on  the  part  of  able  and  pro- 
gressive men.  Briefly,  the  following  are  some  of  its  advantageous 
provisions : 

Commission  form  of  government  with  city  manager;  initiative, 


112 

referendum  and  recall;  election  of  the  city  commission  by  propor- 
tional representation ;  and  civil  service  for  the  selection  of 
employees. 

The  special  provisions  relative  to  public  utilities  are  as  follows: 

FRANCHISES  AND  PUBLIC  UTILITIES, 
Power  to  Grant  Franchises. 

SECTION  144.  The  power  to  grant  irrevocable  franchises  for 
any  public  utility,  enterprise  or  service,  and  to  renew,  amend  and 
extend  the  same,  shall  be  exercised  by  ordinance  only,  which  ordi- 
nance shall  not  become  effective  until  it  shall  have: 

(a)  Been  passed  by  the  City  Commission. 

(b)  Been  unconditionally  accepted  in  writing  by  the  grantee. 

(c)  Been  published  in  full,  together  with  the  grantee's  accept- 
ance, in  a  daily  newspaper  of  the  city,  at  least  once  a  week  for  five 
consecutive  weeks,  the  last  insertion  to  be  made  within  the  week 
immediately  preceding  the  date  of  the  popular  vote. 

(d)  Received  the  affirmative  vote  of  three-fifths  of  the  electors 
of  said  city,  voting  thereon  at  a  regular  or  special  election,  and  upon 
such  propositions  women  taxpayers  having  the  qualifications  of  male 
electors  shall  be  entitled  to  vote. 

Revocable  Permits. 

SECTION  145.  Permits,  revocable  at  the  will  of  the  City  Com- 
mission, for  such  minor  or  temporary  public  utility  privileges  as 
may  be  specified  by  general  ordinance  may  be  granted  and  revoked 
by  the  City  Commission  from  time  to  time  in  accordance  with  the 
terms  and  conditions  to  be  prescribed  thereby;  and  such  permits 
shall  not  be  deemed  to  be  franchises  as  the  term  is  used  in  this 
charter.  Such  general  ordinance,  however,  shall  be  subject  to  refer- 
endum as  provided  in  section  58  of  this  charter  and  shall  not  be 
passed  as  an  emergency  measure. 
Time  Limitations  and  Term. 

SECTION  146.  No  ordinance  granting  or  renewing  a  franchise 
shall  be  adopted  by  the  City  Commission  within  sixty  days  after 
application  therefor  has  been  filed,  nor  shall  a  franchise  ordinance 
be  submitted  to  the  electors  of  the  city  until  after  the  expiration  of 
sixty  days  after  its  preparation  and  adoption  by  the  City  Commis- 
sion and  the  grantee  has  filed  with  the  City  Commission  its  uncon- 
ditional acceptance  of  the  proposed  franchise  or  renewal  if  granted 
by  the  electorate.  No  franchise  shall  be  renewed  before  three  years 
prior  to  its  expiration.  No  franchise  shall  be  granted  for  a  longer 
term  than  thirty  years,  and  every  amendment  and  alteration  there- 
of, and  all  rights  thereunder,  shall  expire  at  the  same  time  as  the 
original  grant,  unless  a  shorter  term  has  been  prescribed  in  the 
amendment  or  alteration. 


113 


Right  of  the  City  to  Purchase  or  Condemn. 

SECTION  147.  Every  franchise  or  renewal  thereof  shall  reserve 
to  the  city  the  right  to  purchase  or  lease  all  the  property  of  the 
utility,  enterprise  or  service  used  in  or  useful  for  the  operation  of 
such  utility,  enterprise  or  service  at  a  price  either  fixed  in  the  ordi- 
nance or  to  be  fixed  in  the  manner  provided  by  the  ordinance  grant- 
ing the  franchise  or  renewal,  which  price  shall  not  include  or  be 
affected  by  the  value  of  the  franchise  or  good  will  or  profits  to  be 
earned  on  pending  contracts  or  any  other  intangible  element.  Noth- 
ing in  such  ordinance  shall  prevent  the  city  from  acquiring  the 
property  of  any  such  utility,  enterprise  or  service  by  condemnation 
proceedings,  or  in  any  other  lawful  mode ;  and  all  such  methods  of 
acquisition  shall  be  alternative  to  the  power  of  purchase  reserved 
in  the  franchise  or  renewal  as  herein  provided.  Upon  the  acqui- 
sition by  the  city  of  the  property  of  any  utility,  enterprise  or  ser- 
vice by  purchase,  condemnation  or  otherwise,  all  franchises  or  re- 
newals, and  all  rights  thereunder,  shall  at  once  terminate.  The 
power  of  the  city  to  purchase  or  condemn  the  franchises  and  prop- 
erty of  any  utility,  enterprise  or  service,  as  hereinbefore  provided, 
shall  apply  to  existing  franchises. 

Rights  of  the  City. 

SECTION  148.  All  grants,  renewals  or  amendments  of  the  fran- 
chises of  any  public  utility,  enterprise  or  service  shall  contain  a 
clause  subjecting  them  to  all  the  provisions  of  this  charter,  and, 
whether  so  provided  in  the  ordinance  or  not,  shall  be  subject  to  the 
right  of  the  city : 

(a)  To  repeal  the  same  by  resolution  at  any  time  for  misuse, 
non-use,  or  failure  to  begin  construction  within  the  time  prescribed, 
or  otherwise  to  comply  with  the  terms  prescribed. 

(b)  To  require  proper  and  adequate  extensions  of  plant  and 
service,  and  the  maintenance  of  the  plant  and  fixtures  at  the  highest 
practicable  standard  of  efficiency. 

(c)  To  fix  the  maximum  rate  of  charge  to  the  public  for  the 
service  furnished,  and  to  readjust  such  rate  of  charge  at  intervals 
to  be  fixed  by  said  ordinance,  but  not  oftener  than  once  in  five 
years;  and  to  establish  and  enforce  reasonable  standards  of  service 
and  quality  of  products :  Provided,  that  no  rate  of  charge  shall  ever 
be  fixed  above  the  maximum  named  in  the  franchise. 

(d)  To  prescribe  the  form  of  accounts  for,  and  at  any  time  to 
examine  and  audit  the  accounts  and  records  of,  any  such  utility, 
and  to  require  annual  and  other  reports  by  each  such  utility,  cover- 
ing whatever  subjects  or  items  (relating  to  its  ownership,  conduct, 
operation,  debts  or  profits)  which  the  City  Commission  shall  specify. 
The  City  Commission  shall  have  access  to  the  plants,  works  or  other 
property  of  any  such  utility. 


114 

(e)  To  impose  such  other  regulations  as  may  be  conducive  to 
the  safety,  welfare  and  accommodation  of  the  public. 

Assignment  of  Franchises. 

SECTION  149.  No  franchise  granted  by  the  City  Commission 
shall  ever  be  leased,  assigned  or  otherwise  alienated  except  in 
accordance  with  the  express  provisions  of  said  franchise,  and  all 
franchises  granted  by  the  City  Commission  shall  provide  how  and 
in  what  manner  and  under  what  conditions  said  franchise  may  be 
leased,  assigned  or  alienated. 

City  to  Control  and  Regulate  Use  of  Streets. 

SECTION  150.  The  right  is  hereby  reserved  to  the  city  to  use, 
control  and  regulate  the  use  of  its  streets,  alleys,  bridges  and  public 
places,  and  the  space  above  and  beneath  them.  Every  franchise 
for  the  operation  of  a  public  utility,  enterprise  or  service  occupying 
the  streets,  alleys,  bridges  or  public  places  of  the  city,  or  the  space 
above  or  beneath  them,  shall  be  subject  to  the  limitation  that  the 
city  may  permit  the  joint  use  of  the  propertv  of  such  public  utility, 
entercrise  or  service  located  in  the  streets,  alleys,  bridges  or  public 
places  of  the  city  by  any  other  public  utility,  enterprise  or  service, 
of  the  city,  on  such  reasonable  terms  as  it  may  impose,  and  upon 
payment  of  a  reasonable  compensation  to  the  owner  thereof.  If  the 
owner  of  such  property  and  the  one  desiring  such  joint  use  are  not 
able  to  agree  on  such  terms  and  compensation  for  the  use  thereof 
within  sixtv  davs  from  the  time  of  opening  negotiations  therefor, 
then  the  City  Commission  shall,  by  ordinance,  after  a  fair  hearing, 
fix  the  terms  and  conditions  of  such  joint  use  and  compensation, 
which  award  of  the  Citv  Commission  when  so  made  shall  be  binding 
and  final  and  observed  by  all  parties  concerned. 

Pavement  of  Streets  by  Street  Railway. 

SECTION  151.  No  franchise  shall  be  granted  or  renewed  for 
street  railway  purposes  except  the  same  shall  contain  a  condition 
that  the  grantee,  its  successors  and  assigns,  shall,  as  the  City  Com- 
mission may  direct,  pave  and  keep  in  repair  the  street  or  streets 
on  which  its  tracks  are  located,  or  shall  be  located,  between  the 
outer  rails  of  the  track  or  tracks,  and  for  a  space  outside  of  said 
rails  of  eighteen  inches,  in  such  manner  and  with  such  materials  as 
the  City  Commission  may  order,  and  shall  re-pave  any  such  parts 
of  streets  as  often  as  the  City  Commission  shall  deem  necessary 
and  so  order;  and  every  such  franchise  or  renewal  shall  contain 
a  requirement  that  every  pavement  torn  up  or  damaged  by  the 
grantee,  its  successors  or  assigns,  in  the  work  of  constructing  or 
repairing  such  tracks  shall  be  replaced  at  the  sole  expense  of  such 
grantee,  its  successors  or  assigns,  in  as  good  condition  and  with 
the  same  kind  of  material. 


115 

Value  to  be  Fixed  and  Determined. 

SECTION  152.  Every  franchise  hereafter  granted  or  renewed 
shall  provide  that  before  the  franchise  becomes  operative  the  value 
of  the  property  of  the  utility,  enterprise  or  service  within  the  city, 
and  of  such  portion  of  the  property  beyond  the  city  limits  as  is  actu- 
ally or  necessarily  used  in,  belonging  to  and  a  part  of  the  local 
service,  and  which  the  city  may  own  and  operate  under  the  con- 
stitution and  general  laws  of  the  State,  shall  be  fixed  and  deter- 
mined :  Provided,  that  such  value  shall  not  include  or  be  affected  by 
the  value  of  the  franchise,  or  good  will,  or  profits  to  be  earned  on 
pending  contracts,  or  any  other  intangible  element. 

Payment  for  Public  Improvements. 

SECTION  153.  All  utility  grantees,  their  successors  or  assigns, 
using  the  streets,  alleys,  bridges  or  public  grounds,  or  the  space  over 
or  under  the  same,  shall  pay  such  part  of  the  improvements,  repairs, 
rebuilding  and  maintenance  of  the  streets,  alleys,  bridges  and  public 
grounds,  on,  over  or  under  which  its  wires,  pipes,  conduits  or  poles 
are  located  as  the  City  Commission  shall  by  resolution  in  each  case 
determine. 

Cost  of  Special  Franchise  Election. 

SECTION  154.  No  franchise  shall  be  submitted  to  the  electors  of 
the  city  at  a  special  election  unless  the  expense  of  holding  the  elec- 
tion, as  determined  by  the  City  Commission,  shall  be  paid  in  advance 
to  the  City  Treasurer  by  the  grantee  of  said  franchise. 

Power  of  City  to  Compel  Resumption  of  Service. 

SECTION  155.  Whenever  any  public  service  corporation  oper- 
ating in  the  city  shall  fail  in  the  opinion  of  the  City  Commission  to 
render  adequate  service  it  shall  be  the  duty  of  the  City  Attorney, 
when  so  instructed  by  the  City  Commission,  at  the  expense  and  in 
the  name  of  the  city,  to  forthwith  institute  mandamus  or  other 
appropriate  proceedings  to  compel  resumption  of  service. 

Power  of  City  Commission  to  Regulate  Rates. 

SECTION  156.  The  City  Commission  shall  have  the  power  and 
authority  to  regulate  the  rates  of  all  public  utility  companies  using 
the  streets,  alleys  or  public  places  of  the  City  of  Kalamazoo  in  all 
cases  in  which  the  franchise  rights  of  such  utility  companies  have 
expired  or  at  the  expiration  of  any  franchise  hereafter. 


116 


Power  of  City  to  Acquire  and  Operate  Utilities. 

SECTION  157.  The  City  of  Kalamazoo  shall  have  and  it  is  hereby 
given  the  right  and  power  to  acquire,  construct,  own,  operate  and 
maintain,  either  within  or  without  its  corporate  limits,  any  public 
utility,  enterprise  or  service,  as  the  City  Commission  may  from  time 
to  time  determine  and  designate,  and  to  acquire  all  property,  real 
and  personal,  necessary  therefor,  and  to  maintain  and  operate  the 
same,  or  to  lease  the  same,  or  any  part  thereof,  to  other  corpora- 
tions or  individuals  for  the  purpose  of  maintenance  and  operation. 
Said  city  may  also  sell  and  deliver  the  products  of  service  of  any 
such  utility  or  enterprise  as  it  is  now  or  may  be  hereafter  authorized 
to  do  by  the  laws  of  the  State. 

City  May  Issue  Its  Mortgage  Bonds. 

SECTION  158.  To  acquire,  construct,  own,  operate  or  maintain 
any  public  utility,  enterprise  or  service  the  city  may  issue  its  mort- 
gage bonds  therefor  beyond  the  limit  of  general  bonded  indebtedness 
prescribed  by  law,  and  subject  only  to  the  conditions  and  limitations 
now  or  hereafter  contained  in  the  constitution  and  the  laws  of  the 
State. 

Procedure  to  Acquire  Utility. 

SECTION  159.  The  City  Commission  by  ordinance  may  pre- 
scribe, or  the  people  by  ordinance  duly  initiated  and  approved  under 
the  provisions  of  this  charter,  may  prescribe  the  procedure  to 
acquire  any  public  utility,  enterprise  or  service. 

Accounts  of  Municipally  Owned  Utilities. 

SECTION  160.  Accounts  shall  be  kept  for  each  public  utility 
owned  or  operated  by  the  city,  distinct  from  other  city  accounts, 
and  in  such  manner  as  to  show  the  true  and  complete  financial  result 
of  such  ownership,  or  ownership  and  operation,  including  all  assets, 
liabilities,  revenues  and  expenses.  Such  accounts  shall  show  the 
actual  cost  to  the  city  of  each  public  utility  owned;  all  expenses  of 
maintenance;  the  cost  of  all  extensions,  additions  and  improve- 
ments ;  the  amounts  set  aside  for  sinking  fund  purposes,  and  in  the 
case  of  city  operation,  all  operating  expenses  of  every  description. 
The  accounts  shall  show  as  nearly  as  possible  the  value  of  any  ser- 
vice furnished  to  or  rendered  by  any  such  public  utility  by  or  to  any 
other  city  or  governmental  department.  The  accounts  shall  also 
show  a  proper  allowance  for  depreciation,  insurance  and  interest 
on  the  investment  on  other  than  invested  profits  of  the  utility  and 
estimates  of  the  amount  of  taxes  that  would  be  chargeable  against 
the  property  if  privately  owned.  The  City  Commission  shall  an- 
nually cause  to  be  made  and  printed  for  public  distribution  a  re- 
port showing  the  financial  results  of  such  city  ownership,  or  owner- 


117 

ship  and  operation,  which  report  shall  give  the  information  specified 
in  this  section  and  such  other  information  as  the  City  Commission 
shall  direct. 

VI 

BRIEF 
Resolved  That  Public  Utilities  Should  Be  Publicly  Owned  and  Operated 

INTRODUCTION 

1.  It  is  granted  that  conditions  and  results  of  present  monopolistic 

system  are  unsatisfactory. 

2.  Public  utilities  should  be  developed  for  the  benefit  of  the  people 

and  protected  from  monopoly  by  large  corporations. 

3.  The  question  therefore  becomes: 

1.  Has  the  public  the  paramount  right  to  own  and  operate 

public  utilities? 

2.  Under  whose  control  is  it  more  expedient  to  own  and  oper- 

ate gas  plants  ? 

THE  ARGUMENT 


THE  RIGHT  TO  OWN  AND  OPERATE  PUBLIC  UTILITIES  Is  A  FUN- 
DAMENTAL RIGHT  OF  GOVERNMENT. 

1.  The  services  performed  by  public  utilities  are  of  a  public 

nature. 

2.  That  the  public  has  the  right  to  control  and  operate  other 

public  utilities  than  gas  plants,  such  as  the  post  office, 
water  works,  sewers,  parks,  schools,  etc.,  has  been  demon- 
strated. 

II 

IT  Is  THE  DUTY  AS  WELL  AS  THE  RIGHT  OF  OUR  GOVERNMENT, 
NATIONAL,  STATE  AND  MUNICIPAL,  TO  TAKE  OVER  AND  OP- 
ERATE ALL  UTILITIES  OF  A  PUBLIC  NATURE,  BECAUSE  : 

Democracy,  the  public  welfare,  social  justice,  good  govern- 
ment and  the  national  defense  are  involved  and  require  it. 

Ill 

PUBLIC  SERVICES  MUST  BE  MONOPOLISTIC  IN  ORDER  TO  BE  EF- 
FICIENT, AND  IF  CONTROLLED  BY  PRIVATE  CORPORATIONS,  SUCH 
CORPORATIONS 

1.  May  become  sufficiently  strong  under  private  control  to  be 
independent  of  government. 


118 

2.  May  usurp  the  powers  of  government. 

3.  May  tend  to  control  legislative  and  regulative  bodies,  who, 

therefore  represent  the  corporations  and  not  the  people. 

4.  May  become  a  social  menace. 

IV 
A  PRIVATE  MONOPOLY  Is  ALWAYS  OBJECTIONABLE. 

1.  Private  financiers  encroach  upon  the  government  domain. 

2.  Public  utilities  are  too  closely  related  to  politics. 

3.  Legislative  corruption  possible  through  corporation  bribes. 

4.  Stock  heavily  watered. 

5.  Charges  under  private  monopoly  inequitable. 

V 

PUBLIC  OWNERSHIP  Is  MORE  EFFICIENT,  AND  SUPPLIES  THE 
PUBLIC  AT  LOWER  RATES. 

1.  Each  employee  is  a  partner,  and  the  sole  motive  is  to  render 

justice  and  service  to  both  employees  and  the  public; 
while  under  private  ownership  the  sole  motive  is  profit 
for  the  financiers  only. 

2.  Public  ownership  is  conducted  openly,  while  private  owner- 

ship is  conducted  secretly,  and  is  accompanied  with  rec- 
ords and  accounts  which  are  always  misleading,  and 
often  flagrantly  false. 

3.  Efficient  service  guaranteed  by  success  of  streets,  sewers, 

schools,  water  works,  etc. 

4.  Reduction  of  management  and  of  operating  cost  can  be 

accomplished  through 

1.  Elimination  of  necessity  of  dividends  on  watered  stock. 

2.  Elimination  of  expenses  to  influence  legislation. 

3.  Elimination  of  advertising  bills. 

4.  Elimination  of  insurance  expense. 

5.  Elimination  of  extravagant  salaries  to  directors. 

6.  Elimination   of  fraudulent   bookkeeping  by   enforced 

publicity  of  accounts. 

7.  Decrease  in  cost  of  material  and  of  interest  on  money 

employed  by  co-operation  with  national  Government, 
and  elimination  of  profits  made  through  interlocking 
directorates. 

5.  Municipal  service   furnished  at  cost,  or  at  modest  profit 

would  make  possible 

1.  Cheaper  rates. 

2.  More  general  use  in  homes  and  in  commercial  lines. 

3.  Reduced  expenses  for  city  lighting. 

6.  Municipal  ownership  of  gas  plants  in  other  countries  has 

resulted  in 


119 

1.  Greater  use  of  gas  for  domestic  and  industrial  purposes. 

2.  Better  quality  of  gas  furnished. 

3.  Gas  produced  at  less  cost. 

4.  Higher  wages  paid  employees,  on  the  average. 

5.  More  gas  and  by-products  obtained  from  ton  of  coal. 

6.  Gas  and  coke  sold  the  people  at  lower  rate. 

8.  More  substantial  and  artistic  plants. 

7.  General  taxation  relieved  by  net  profits. 

9.  Better  working  conditions. 

10.  More  adequate  lighting  in  public  places. 

11.  Demand  for  accuracy  of  accounts  and  publication  of 

same. 

12.  Greater  democratic  spirit  manifested. 
7.  Capital  easily  secured  by  city  government. 

1.  No  taxes. 

2.  Low  interest. 

3.  Bonds  issued  for  adequate  time  and  paid  from  profits. 


VII 

CONSTITUTION  OF  THE  PUBLIC  OWNERSHIP  LEAGUE  OF 

AMERICA 

ARTICLE  I 
Name  and  Purpose 

This  organization  shall  be  known  as  the  PUBLIC  OWNERSHIP 
LEAGUE  OF  AMERICA. 

The  public  ownership  and  operation  of  public  utilities  and  na- 
tural resources  being  a  function  of  government  and  necessary  for 
securing  democracy,  social  justice  and  good  government,  it  is  the 
purpose  of  this  league  to  promote  the  public  ownership,  efficient 
management  and  democratic  control  of  public  utilities  and  natural 
resources — municipal,  state  and  national — as  rapidly  and  as  far  as 
may  be  practical  and  consistent  with  the  public  welfare;  all  to  be 
operated  with  justice  both  to  the  public  and  the  employee. 

To  effect  this  purpose,  the  League  will  secure,  classify  and  dis- 
seminate information  relating  to  those  subjects  by  all  proper  means 
and  methods. 

The  League,  being  non-partisan,  shall  not  officially  endorse 
any  political  party  or  its  candidates,  but  each  member  shall  be  free 
to  act  politically  as  his  judgment  may  dictate. 


120 

ARTICLE  II 
Officers  and  Committees 

The  officers  of  this  League  shall  be  a  president,  seven  vice-presi- 
dents, a  secretary  and  a  treasurer,  who  with  the  exception  of  the 
secretary  shall  be  elected  at  the  annual  meeting  and  serve  for  one 
year  or  until  their  successors  are  elected. 

There  shall  also  be  elected  at  each  annual  meeting  an  Executive 
Committee  of  five  members;  and  a  Finance  Committee  of  five  or 
more  members  may  be  appointed  by  the  president.  The  members  of 
the  Finance  Committees  and  the  officers  of  the  League  shall  also 
be  ex-officio  members  of  the  Executive  Committee.  Five  mem- 
bers shall  constituted  quorum  of  the  Executive  Committee. 

The  Executive  Committee  shall  direct  and  supervise  the  work  of 
the  League,  shall  elect  the  secretary,  fix  his  compensation,  direct 
and  supervise  his  work,  and  shall  have  the  power  to  fill  any  vacancies 
of  officers  or  members  of  committees  until  successors  are  elected; 
and  may  also  increase  the  membership  of  any  committee  or  the 
number  of  vice-presidents  until  the  next  annual  meeting.  It  shall 
also  elect  any  special  committees  that  in  its  judgment  are  required 
from  time  to  time,  and  shall  perform  all  other  duties  which  usually 
pertain  to  such  committee. 

In  recognition  of  special  service  rendered  in  advancing  the  pur- 
poses of  this  League,  the  Executive  Committee  may  elect  honorary 
members  and  officers,  as  it  may  find  desirable. 

ARTICLE  III 
Membership 

Any  person  in  accord  with  the  objects  and  principles  of  this 
League  may  become  a  member  by  filing  a  signed  application  with  the 
secretary  and  paying  the  membership  fee,  subject  to  the  approval 
of  the  Executive  Committee.  There  shall  be  three  types  of  mem- 
bers: (1)  associate  members,  paying  $2.00  membership  fee  per 
year;  (2)  regular  members,  paying  $5.00  per  year;  and  (3)  con- 
tributing members,  paying  $10.00  or  more  per  year. 

The  regular  and  contributing  members  shall  be  entitled  to  all 
publications  and  bulletins  of  the  League  and  to  such  other  services 
as  the  League  may  render  its  members.  The  associate  members 
shall  be  entitled  to  similar  service  in  proportion  to  their  fees  and 
contributions.  All  members  shall  be  entitled  to  attend  and  to  have 
a  voice  and  a  vote  in  all  meetings  of  the  League. 


121 

ARTICLE  IV 
Meeting 

An  annual  meeting  of  the  League  shall  be  held  each  year  for 
the  election  of  officers  and  for  the  transaction  of  all  other 
business,  which  may  properly  come  before  such  meeting.  The 
meetings  shall  be  called  at  such  time  and  place  as  the  Executive 
Committee  shall  direct.  Special  meetings  of  the  League  may 
also  be  called  by  the  president  with  the  approval  of  the  Executive 
Committee  or  upon  the  written  application  of  fifty  members,  all 
members  to  be  notified  in  advance  by  mail  of  each  regular  or  special 
meeting. 

ARTICLE  V 
Local  Organisations  and  Affiliated  Bodies 

Local  organizations  of  the  League  may  be  formed  subject  to  the 
approval  of  the  Executive  Committee  whenever  a  sufficient  number 
of  members  can  be  secured  to  make  such  organization  practical. 
The  National  League  shall  encourage  the  formation  of  such  local 
organization  which  shall  have  full  control  of  their  own  local  affairs, 
fix  their  own  dues,  and  shall  take  out  and  maintain  at  least  five 
memberships  in  the  National  organization  and  as  many  more  as 
they  are  able.  Such  local  organizations  shall  be  entitled  to  as  many 
votes  in  the  meetings  of  the  League  as  they  have  paid  up  mem- 
berships, Local  municipal  or  public  ownership  leagues  already 
formed  and  other  organizations  in  accord  with  the  objects  of  this 
League  may,  subject  to  the  approval  of  the  Executive  Committee, 
join  upon  the  same  basis  as  above. 

ARTICLE  VI 
Information  Service 

The  League  shall  conduct  an  information  service,  the  purpose 
of  which  shall  be  to  collect  through  research,  and  to  classify  and 
make  available  data  and  information  on  the  subject  of  public  owner- 
ship throughout  the  world.  It  shall  be  the  aim  of  this  service  to 
supply  the  members  of  the  League  and  affiliated  organizations, 
public  officials  and  others  desiring  it,  reliable  information  bearing 
upon  the  public  ownership  of  public  utilities. 


122 

ARTICLE  VII 
Amendments 

This  constitution  may  be  amended  at  any  regular  or  special 
meeting  of  the  League. 


APPLICATION  FOR  MEMBERSHIP 

Public  Ownership  League  of  America, 
1437  Unity  Building, 

127  N.  Dearborn  Street, 
Chicago,  Illinois. 

Approving  the  purposes  of  your  League,  I  hereby  apply  for 

membership  in  the  same  and  enclose  herewith 

(P.  O.  order  or  check) 

$ , for  the  class  indicated  by  the  amount  of  this 

payment  as  per  the  various  rates  noted  herewith. 
Yearly  membership  fees: 

Associate,  $2.00  Name 

Active,  $5.00.  No.  and  Street — 

Contributing,  $10  and  upwards.       City  and  State 


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